Donald Trump has warned that the U.S. could face a major economic downturn, possibly a “depression,” as he criticized a debt ceiling deal negotiated by former House Speaker Kevin McCarthy. Trump took to social media to accuse Democrats of being willing to risk economic collapse if it harms Republicans.
Trump, who will take office in January, expressed frustration that a provision to raise the debt ceiling was not included in a recent government funding bill. He urged lawmakers to tackle the debt ceiling issue immediately, while President Joe Biden is still in office, to avoid the burden falling on his administration.
What Is the Debt Ceiling?
The debt ceiling is the maximum amount the U.S. government can borrow to pay its obligations, such as Social Security, military salaries, and interest on the national debt. If the ceiling is not raised in time, the government risks defaulting on its debts, which could have disastrous economic consequences.
Currently, the U.S. national debt stands at approximately $36 trillion. Under a 2023 deal, the debt ceiling has been suspended until January 1, 2025, but action will be required after that to prevent a default. Treasury Secretary Janet Yellen has warned that “extraordinary measures” may need to be taken as early as mid-January to keep the government running.
Trump’s Concerns
Trump called the 2023 debt ceiling agreement “one of the dumbest political decisions made in years,” blaming the decision to extend the limit into 2025 for putting his administration at risk. He argued that the issue should be resolved now, under Biden’s leadership, rather than being delayed until he takes office.
Trump wrote on Truth Social, “The Democrats must be forced to take a vote on this treacherous issue NOW, during the Biden Administration, and not in June. They should be blamed for this potential disaster, not the Republicans!”
Vice President-elect JD Vance echoed Trump’s sentiments, stating that while raising the debt ceiling is not ideal, it would be better to address the issue now rather than during the Trump administration.
Economic Implications
Economists agree that failing to raise the debt ceiling could have catastrophic consequences, including a government default and a potential recession. Even the threat of a default has, in the past, shaken financial markets and slowed economic growth.
In her letter to Congress, Yellen emphasized the urgency of the situation, stating, “I respectfully urge Congress to act to protect the full faith and credit of the United States.”
Biden’s Position
President Biden recently signed a stopgap spending bill to fund the government through March 24, 2025, but the legislation did not include a provision to raise the debt ceiling. Biden described the bill as a compromise, rejecting Republican demands for tax cuts for billionaires and ensuring the government remains operational.
What’s Next?
Starting January 3, Republicans will control both chambers of Congress, but it remains uncertain whether they will address the debt ceiling before Trump’s inauguration on January 20. If Treasury begins deploying extraordinary measures in mid-January, the government may continue to operate for several months, but Congress will need to take action to prevent a default later in 2025.
As the debate over the debt ceiling unfolds, Trump has made it clear that he wants the issue resolved before his administration begins, to avoid jeopardizing his presidency and economic agenda. Meanwhile, economists and political leaders continue to warn of the high stakes involved in delaying action.
