By The Associated Press’s Meg Kinnard
Washington is on the verge of a federal government shutdown due to a financial conflict that revolves around the debt ceiling.
In order to prevent a government shutdown, President-elect Donald Trump has insisted that legislation include a clause that raises or suspends the nation’s debt ceiling—something that his own party consistently opposes. Trump said in a statement on Wednesday that doing anything other would be a betrayal of our nation.
Republicans promptly complied, including by putting a clause suspending the debt ceiling for two years, until January 30, 2027, in a revised government financing measure.However, the bill was heavily defeated in a House vote on Thursday night, leaving the future unclear.
What you should know about the debt ceiling controversy and how it’s affecting the shutdown story is as follows:
What is the debt ceiling?
The entire amount of money that the US government can borrow to satisfy its current legal commitments is known as the debt ceiling or debt limit. Congress must raise the cap before the Treasury Department may borrow more than that.
Thefederal debtstands at roughly $36 trillion, and the spike in inflation after the coronavirus pandemic has pushed up the government s borrowing costs such that debt service next year will exceed spending on national security.
Legislators last increased the debt ceiling in June 2023. Instead than increasing the debt ceiling by a certain amount, lawmakers decided to postpone it until January 1, 2025. The limit will thereafter be automatically increased to reflect the total amount of debt issued by the Treasury Department.
A must-pass bill that can be laden with other priorities, the debt limit vote has recently been exploited as a political bargaining point.
What is the debt ceiling fight all about?
Trump has linked the federal funding battle to his desire to address the debt ceiling, arguing that the two issues cannot be resolved separately.
When he rejected the spending proposal on Wednesday, Trump said that he wanted the debt ceiling debate settled before he takes office next month.
Warning oftrouble aheadfor Johnson and Republicans in Congress, Trump told Fox News Digital, Anybody that supports a bill that doesn t take care of the Democrat quicksand known as the debt ceiling should be primaried and disposed of as quickly as possible.
What happens if the debt ceiling isn t raised?
There s actually no need to raise the debt limit right now. On Jan. 1, when the debt limit is triggered, the Treasury Department can begin using what it calls extraordinary measures to ensure that America doesn t default on its debts.
Some estimate these accounting maneuvers could push the default deadline to the summer of 2025 but that s exactly what Trump wants to avoid, since an increase would then be needed while he is president.
Lawmakers have always raised the debt ceiling in time because the consequences of failure are stark. Without action, the government would go into default on its debts, a first-ever situation that Treasury Secretary Janet Yellen and economic experts have said could be catastrophic for the economy and global markets.
Raising or suspending the debt limit does not authorize new spending or tax cuts; it merely acknowledges past budgetary decisions that is, current budget law and so allows the federal government to meet its existing legal obligations. For that reason and others, some have advocated doing away with the limit altogether.
What could the debt ceiling fight mean for Speaker Mike Johnson?
Dealing with the debt ceiling could have ramifications for Johnson, as he angles to keep his job in the new Congress that begins on Jan. 3.
Trump said early Thursday that Johnson will easily remain speaker for the next Congress if he acts decisively and tough in coming up with a new plan to alsoincrease the debt limit, a stunning request just before the Christmas holidays that has put thebeleaguered speakerin a bind.
House Minority Leader Hakeem Jeffries, D-N.Y., meets with reporters after President-elect Donald Trump abruptly rejected a bipartisan plan to prevent a Christmastime government shutdown, at the Capitol in Washington, Thursday, Dec. 19, 2024. (AP Photo/J. Scott Applewhite)AP
The last House speaker, Kevin McCarthy, worked for months with President Joe Biden to raise the debt limit. Even thoughthey struck a bipartisan dealthat cut spending in exchange for additional borrowing capacity, House Republicans said it didn t go far enough, and it ended upcosting McCarthy his job.
Now, Trump is looking for Johnson to pass a debt ceiling extension just hours before a partial government shutdown.
What are Democrats saying about the debt ceiling debate?
After meeting with his caucus, Democratic Leader Hakeem Jeffries rejected any possibility that his members would bail out Republicans as the shutdown threat looms.
GOP extremists want House Democrats to raise the debt ceiling so that House Republicans can lower the amount of your Social Security check, Jeffries posted Thursday on social media. Hard pass.
Jeffries and other Democrats say Republicans should honor the spending agreement that was negotiated before Trump got involved. He called the new GOP plan laughable.
Kinnard reported from Charleston, South Carolina, and can be reached athttp://x.com/MegKinnardAP
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