The Gridlock
escalating dispute persists over US debt coverage - despite tentative agreement reached
Just before the holiday rush, the US Senate and House of Representatives managed to avoid a government shutdown by agreeing on a temporary funding measure. This solution lasts until mid-March, but it doesn't mask the ongoing budget stalemate between the two chambers of Congress. It also highlights the turmoil in the Republican Party and the growing influence of Elon Musk on future President Donald Trump.
Avoiding a shutdown at this critical time prevented logistical nightmares, such as canceled flights during the peak travel season due to absent air traffic controllers, and disruptions to all non-essential government services. Both parties were wary of voter backlash, so they reluctantly found common ground.
Included in the agreement are allocations of $100 billion for disaster-stricken regions and $30 billion in agricultural subsidies. However, Democrats had to forfeit funding for various social and health programs. Donald Trump also faced a setback – he had requested the debt ceiling suspension, currently $31.4 trillion, but this demand was denied.
Initially, the debt ceiling was suspended until early 2025. With the national debt already exceeding $35 trillion, the Treasury Department will need to resort to creative accounting tactics after the New Year to keep the government operating. These measures will be depleted by mid-2025.
Loss for Trump
Without a higher debt ceiling, Trump won't be able to pass the promised tax cuts, as they are not deficit-financed. Republicans have promised to take up a long-term budget bill immediately following the swearing-in of the new Congress, which would raise the legal limit and include significant cuts to social programs.
However, opposition to a higher debt ceiling isn't limited to Democrats. Even fiscally conservative Republicans are reluctant, proving that this new President will encounter resistance within his own ranks. Trump has been applying immense pressure on reluctant Republicans, threatening to support future challenges from within the party and mobilizing his supporters against them. But it's far from certain that Republicans will keep their promises to Trump, despite their majorities in both chambers.
Insights:
- The concurrent FY 2025 budget resolution in the Senate allows for a $5 trillion debt ceiling increase[2][3], which may provide legislative flexibility for increased borrowing.
- Trump-era Tax Cuts and Jobs Act (TCJA) provisions, if extended without offsets, could worsen the CBO's projected deficit[4], accelerating debt growth beyond current projections.
- The Senate's budget framework reduces procedural barriers for deficit-increasing tax policies, potentially heightening fiscal risks[4].
- Elon Musk's influence on President Donald Trump's policy-and-legislation decisions continues to be a significant factor in politics, particularly in the ongoing budget stalemate between the US Senate and House of Representatives.
- The gridlock between the two chambers of Congress, combined with the refusal to grant Trump's request for a higher debt ceiling, could potentially hinder his ability to implement tax-cut maneuvers by 2025, as these measures require deficit financing.
- In the general-news sphere, the ongoing budget struggles, with their implications for social-and-health programs, disaster-recovery, and agricultural subsidies, are a key aspect of war-and-conflicts within the Republican Party.
- Despite the Democratic opposition, the Republicans, who hold majorities in both chambers, might attempt to pass a long-term budget bill in early 2023, raising the debt ceiling and enacting significant cuts to social programs.
- The failure to raise the debt ceiling and the subsequent resistance from fiscally conservative Republicans could lead to instances of crime-and-justice, as the refusal to support the President's demands might result in political backlash within their party and among his supporters.
