Title: The Debt Ceiling Clock Ticking Down as the U.S. Approaches Its Limit on Tuesday
Debating the debt ceiling ceiling is putting pressure on Republican-controlled Congress, but they've got some breathing room before taking action to avoid the first-ever default. Extraordinary measures, typically accounting maneuvers performed out of sight, will last until March 14, as Yellen explained.
Republicans dominate Capitol Hill, but they're divided on addressing the debt ceiling. They've got several major agenda points, like border security, energy, and tax cuts, and they're eager to push them through Congress without bipartisan support. Furthermore, lawmakers need to pass a 2025 government funding bill, which started October 1. The current temporary spending measure expires on March 14.
A debt ceiling bill could potentially be included in these packages, though historically, it's been a bipartisan effort. House Speaker Mike Johnson is confronting resistance from fiscally conservative members who took issue with not reducing the debt, but rather increasing it. His slim majority will complicate reaching a compromise, and he might even need Democratic support to get the increase approved.
Fissures within the party emerged in December when Trump demanded addressing the limit as part of a temporary spending bill. However, the GOP-led package, which included suspending the cap until January 2027, failed amid opposition from Republicans.
Following the Republican takeover of both the White House and Congress, the debate's internal nature is paramount, as there are no external "hostages" to hoist. Some Republicans have floated proposals to increase the debt limit by $1.5 trillion as part of a 2025 reconciliation package, accompanied by $2.5 trillion in mandatory spending cuts. But this solution would offer temporary relief.
In 2023, the debt ceiling was suspended until January 2 due to the Fiscal Responsibility Act, which led to a $31.4 trillion cap. However, a technical quirk kept the U.S. from hitting the limit on January 2, thanks to scheduled securities redemption that would lower the debt level for the day. Yellen warned that the cap would be reached between January 14 and January 23.
[2] Source: Politico[3] Source: Brookings Institute[5] Source: CNN
Business interests are closely monitoring the debt ceiling discussions, as a default could have significant economic consequences. Despite Republican control of both the White House and Congress, negotiating a debt ceiling increase is proving to be a complex task, with fiscally conservative members opposing any increase without corresponding spending cuts.
