Trump intervened to sink America's debt. What happens next? | Donald Trump News

The US Congress has until Friday midnight to pass a bill that increases the country's borrowing limit, also known as the debt limit, otherwise large parts of the government could go out of business.

A bill that would have extended the deadline until March 14, prepared by both Democrats and Republicans, was defeated after President-elect Donald Trump announced his opposition on Wednesday, following an attempt by billionaire Elon Musk to raise opposition.

Republicans have indicated that a new bill has been agreed upon and a vote could take place on Thursday evening, but it is still unclear whether it will pass both houses of Congress.

What is the debt ceiling, why is there so much controversy, and what can this latest episode tell us about Musk and his growing influence in American politics?

How much is the debt?

The debt limit is a limit set by the US Congress on how much money the government can borrow to cover the gap between its income and spending.

How often is debt raised?

The US has increased the debt 103 times since 1939, and it has been a process in US politics for most of that time.

Failure to raise the credit rating means that the US Treasury could have trouble making payments related to the country's debt, which could disrupt global financial markets and hurt the country's credit ratings.

When did debt become so controversial?

In 1995 and 1996, the Republican-controlled Congress, led by highly adversarial House Speaker Newt Gingrich, used the prospect of allowing the debt to expire to push more spending cuts to then-president Bill Clinton.

Although it is often framed as a representation of financial principles, discussions on why debt can be a political opportunity for groups – usually in the minority – to use their power to gain approval from a rival party or the president. There may also be times when rival factions within a party fight over important issues.

Another disagreement occurred between December 2018 and January 2019, during Trump's first term in office, when the Republicans released a relief bill for COVID-19 with an emphasis on the provision of harsh anti-immigration measures.

That shutdown was the longest in American history and was widely seen as a political blow to Trump and Republicans.

What role does Trump play in the current debate?

The president-elect has a lot of power in the conservative Republican Party, and his announcement of opposition to the bipartisan debt relief bill on Wednesday was enough to ensure its demise.

What does Trump want to see instead?

It is not clear what Trump wants to replace the bill with. But he said he wants his second term removed from the tricky political question of debt renegotiation. On Thursday's television show, he suggested that the debt moratorium could be ended entirely.

What will Republican lawmakers do now?

Both Trump and Musk have warned Republican lawmakers of the consequences if they support the bipartisan bill. Some lawmakers were caught off guard, saying Trump had hampered their efforts by stepping in at the last minute to fix the negotiations.

“President Trump's last-minute request to end the debt moratorium adds another layer to the debate,” said Senator Susan Collins, the top Republican on the Senate Appropriations Committee.

Trump's intervention also put Republican Majority Speaker Mike Johnson in a bind, as he scrambles to reach a deal and avoid a government shutdown without running afoul of the incoming Republican president weeks before he faces his own battle to retain his leadership position.

“Whoever supports the bill that does not take care of the economy of the Democratic Alliance known as the democratic ceiling should be considered and rejected very quickly,” Trump told Fox News Digital.

What role did Elon Musk play?

Billionaire tech giant Elon Musk, who has emerged as a key ally of Trump and a power broker within the Republican Party, took to social media to oppose the bipartisan bill, which he described as overspending.

“My phone was ringing off the hook,” Republican Representative Andy Barr said Wednesday. “The people who elected us listened to Elon Musk.”

What does this say about Musk's emerging role in the Trump administration?

Musk has positioned himself as an expert against government spending and regulation. He is poised to lead the so-called Department of Government Efficiency (DOGE) in the incoming Trump administration, which will seek to cut nearly $2 billion in annual budget cuts.

If Musk portrays himself as anti-big government, many Democrats see something else: the world's richest man using his power, outside of elected office, to reshape government in favor of private industry.

What are the Democratic Alliance lawmakers saying?

Democrats used the sudden collapse of the bipartisan bill to portray the Republican Party as willing to put their loyalty to Donald Trump and wealthy figures like Elon Musk above their responsibilities as lawmakers.

“This reckless Republican-driven shutdown can be avoided,” said House Democratic Leader Hakeem Jeffries, adding that Republicans should “do what's best for the American people and stick to the bipartisan deal they negotiated.”

Some have pointed out that conservatives who want to cut such programs also plan to extend the series of tax cuts since Trump's first presidency, which have mostly benefited the super-rich.

Doing so would cost the government an estimated $4 trillion in lost revenue over the next 10 years, adding to the estimated $36 trillion national debt.

Democrats are likely to react positively to Trump's proposal to end the bankruptcy, which Republicans have long used as an opportunity to force cuts in social welfare programs.

“I agree with President-elect Trump that Congress should end the debt ceiling and not rein in sequestration,” Senator Elizabeth Warren said Thursday.