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The US Congress has until Friday at midnight to pass a bill raising the country’s borrowing limits, also known as the debt ceiling, without which large sections of the government could stop operating.
A bill that would have extended the deadline until March 14, prepared by both Democrats and Republicans, was scuttled after President-elect Donald Trump announced his opposition on Wednesday, following an effort by billionaire ally Elon Musk to raise opposition.
Republicans have indicated that a new bill has been agreed, and a vote could happen on Thursday evening. But it’s still unclear if it will actually pass in both houses of Congress.
What is the debt ceiling, why is it so contentious, and what can this latest episode tell us about Musk and his growing influence in US politics? We take a look at those questions and more in this brief explainer.
What is the debt ceiling?
The debt ceiling is a cap imposed by the US Congress on how much money the government can borrow to cover the gap between its revenue and how much it spends.
How often is the debt ceiling raised?
The US has raised the debt ceiling 103 times since 1939, and it has been a largely procedural act in US politics for most of that time.
Failure to raise the debt ceiling means that the US Treasury could have trouble making payments related to the nation’s debt, which could rattle global financial markets and harm the country’s vaunted credit rating.
When did the debt ceiling become so controversial?
In 1995 and 1996, a Republican-controlled Congress led by the more adversarial House Speaker Newt Gingrich used the prospect of allowing the debt ceiling to expire to push for additional spending cuts from then-president Bill Clinton.
While often pitched as a principled stand for fiscal rectitude, debt ceiling negotiations have become a political opportunity for parties — often in the minority — to use their leverage to extract concessions from the rival party or the president. They can also become occasions where rival factions within a party battle over priorities.
One such standoff took place between December 2018 and January 2019, during Trump’s first term in office, when the Republican tanked a COVID-19 relief bill by insisting on provisions for more aggressive anti-immigration measures. That shutdown became the longest in US history, and was widely seen as politically damaging for Trump and the Republicans.
What role is Trump playing in the current talks now?
The president-elect wields substantial influence over the conservative Republican Party, and his announcement of opposition to the bipartisan debt ceiling bill on Wednesday was enough to effectively guarantee its death.
What does Trump want to see instead?
It is not entirely clear what Trump wants to replace the bipartisan bill with. But he has said that he wants the politically tricky question of debt ceiling renegotiations off the table for his second term in office, and suggested on a Thursday television programme that the debt ceiling could be eliminated altogether.
What will Republican lawmakers do now?
Both Trump and Musk warned Republican lawmakers of consequences if they supported the bipartisan bill. Some lawmakers have been caught off guard, stating that Trump has complicated their efforts by stepping in at the last minute to upend negotiations.
“President Trump’s last-minute request that the debt ceiling be eliminated throws a whole other issue into the debate,” said Senator Susan Collins, the top Republican on the Senate Appropriations Committee.
Trump’s intervention has also put Republican House Majority Speaker Mike Johnson in a bind, as he rushes to reach a deal and avert a government shutdown without falling afoul of the incoming Republican president just weeks before he faces his own fight to retain his current leadership position.
“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,” Trump told the news agency Fox News Digital.
What role did Elon Musk play?
Billionaire tech mogul Elon Musk, who has emerged as a key Trump key ally and power broker within the Republican Party, took to social media to rally opposition against the bipartisan bill, which he portrayed as full of excessive spending.
“My phone was ringing off the hook,” Republican Representative Andy Barr said on Wednesday. “The people who elected us are listening to Elon Musk.”
What does this say about Musk’s emerging role in the Trump administration?
Musk has positioned himself as a crusader against government spending and regulation, heading up a group known as DOGE that will seek to trim about $2 trillion of federal spending from the annual budget.
If Musk portrays himself as a fighter against government largesse, many Democrats see something else: the richest man in the world wielding his power, without an elected position, to reshape government in favour of private industry.
What are Democratic lawmakers saying?
Democrats have used the sudden collapse of the bipartisan bill to portray the Republican Party as willing to place their loyalty to Donald Trump and wealthy figures like Elon Musk above their responsibilities as lawmakers.
“This reckless Republican driven shutdown can be avoided,” Democratic House Leader Hakeem Jeffries said, adding that Republicans should “simply do what is right for the American people and stick with the bipartisan agreement that they themselves negotiated”.
Others have pointed out that conservatives pushing for cuts to such programmes are also planning on extending a series of tax cuts from Trump’s first term, which largely benefited the ultra-wealthy.
Doing so would cost the government about $4 trillion in lost revenue over the next 10 years, adding to the government’s current debt of about $36 trillion.
Democrats may respond positively to Trump’s proposal to eliminate the debt ceiling, which Republicans have long used as an occasion to push for steep cuts to social programmes.
“I agree with President-elect Trump that Congress should terminate the debt limit and never again govern by hostage taking,” Senator Elizabeth Warren said on Thursday.
