The United States is facing a debt ceiling crisis, with a government shutdown looming, and Trump is calling for the direct abolition of the debt ceiling

The US debt ceiling is once again on the table. President-elect Trump has called for the direct cancellation of the debt ceiling, but was rejected by the House of Representatives. Meanwhile, officials from the Efficiency Department, Musk and Vivek Ramaswamy, also oppose the current proposals from the House and Senate to extend government funding until March. Friday is the deadline to avoid a government shutdown. Can the US successfully resolve the crisis this time?

What is the debt ceiling?

As the name suggests, the debt ceiling is the limit on the amount of borrowing the US government can do, first established by Congress in 1917. Due to lawmakers continually passing legislation that spends more money than the government takes in, the Treasury Department must continue to borrow more money, thereby raising the debt. When the debt approaches the ceiling, the Treasury takes so-called extraordinary measures—essentially accounting tricks that have been used repeatedly over decades—to ensure that its cash buffer does not run out completely. These measures include temporarily suspending the reinvestment of Treasury bonds held by various government funds, including the government employee retirement fund. In more severe cases, the inability to pay salaries can lead to a federal government shutdown.

Since 1981, the U.S. federal government has experienced 14 shutdowns, most of which lasted only one or two days. The most recent and longest one occurred from December 2018 to January 2019 due to a security dispute at the U.S.-Mexico border.

Why does Trump want to cancel the debt ceiling?

The US Congress will temporarily lift the ceiling in June 2023 until early 2025. With the upcoming inauguration of Trump, this headache will be faced.

According to Bloomberg, as Trump's top fiscal priority next year will be to extend the individual income tax cuts he enacted in 2017, the tax cuts are set to expire by the end of 2025, and reducing taxes will result in an increasing debt burden.

Traditionally, many Republicans have been unwilling to vote to raise the debt limit, believing it to be incompatible with controlling the budget deficit. Trump's idea did win the support of an unlikely supporter: progressive Democratic Senator Elizabeth Warren, who posted on X on December 19th that the debt limit was equivalent to political 'hostage-taking'.

House Democrat Brendan Boyle, a senior member of the House of Representatives, previously proposed legislation authorizing the Treasury Secretary to unilaterally raise the debt ceiling while preserving Congress's power to vote down the measure. Outgoing Treasury Secretary Janet Yellen expressed strong support for such proposals at a 2022 hearing, stating that regularly facing debt ceiling crises is simply 'crazy'!

Musk also came to stir things up

Faced with this deadlock, Congress may have to consider legislation on the debt ceiling, or postpone it for a period when the Treasury begins to run out of cash and take extraordinary measures. Currently, the House and Senate have agreed to extend government funding until March, but the deal includes about $29 billion for replenishing disaster relief funds, over $30 billion for agricultural programs, and billions of dollars of various disaster-related expenditures, which has angered government efficiency officials-elect Musk and Vivek Ramaswamy.

Musk posted on his social platform X, stating:

The more I understand, the more obvious it is that this expenditure bill is a kind of crime. It's much better for the government to shut down than to pass a terrible bill.

Friday is the deadline to avoid a government shutdown, and Mike Johnson, the Speaker of the House who is pushing for this plan, says he has been texting Musk and Ramaswamy to explain the background.

The past debt ceiling has also raised warnings from credit rating agencies, which believe that these events have damaged the United States' fiscal reputation. In the last review of this issue, Fitch Ratings ultimately downgraded the United States' rating by one notch to AA+, even after the ceiling was suspended.

Trump supports completely abolishing the debt ceiling

Trump insists on demanding Republican leaders to add a provision to waive or increase the federal debt limit before he takes office. However, it has been rejected by the House of Representatives.

Trump told NBC News that completely abolishing the debt ceiling would be the "smartest thing" lawmakers could do. And he said, "I totally support this!"

This article originally appeared in Chain News ABMedia. The United States is facing a debt ceiling crisis, with a government shutdown imminent. Trump has called for the direct abolition of the debt ceiling.