A new debt ceiling was established this week, setting up a debate for the months ahead about averting a government default.
The parameters of that coming standoff are already making Donald Trump unhappy.
The issue for the president-elect is how events are conspiring — thanks to the nudging of both Democrats and far-right Republicans — to make the inevitable move by Trump and his allies to allow new governmental borrowing a messy one.
Few can currently imagine that Republicans would actually allow a default to occur later this year. The GOP will have unified control of Washington’s levers of power within weeks and would be fully blamed for any default.
In a recent social media post, Trump railed against the state of the debt ceiling and called the deal that put it on the 2025 agenda "one of the dumbest political decisions made in years."
But the clock is nevertheless now ticking, with Treasury Secretary Janet Yellen recently outlining the steps ahead for the debt limit and noting that so-called "extraordinary measures" could begin within days to avoid a default.
'It was Biden’s problem'
The roadblock for Trump is how closely the debt ceiling issue is likely to become intertwined with other issues on his early agenda, which range from border measures to energy policy to tax cuts.
"It was Biden’s problem, [but] now it becomes ours," Trump acknowledged last week.
A debt ceiling bill didn’t even get a majority and failed by a vote of 174-235, even as a follow-up bill passed overwhelmingly once the debt ceiling provision was removed.
And House Speaker Mike Johnson may have made this year's debt ceiling standoff even more politically complex.
He promised that a debt ceiling deal would happen through the reconciliation process and that it would pair a debt limit increase of $1.5 trillion with $2.5 trillion in cuts made to "net mandatory spending."
That’s likely to be much easier said than done.
On one hand, the hyper-partisan reconciliation process is likely to be opposed by all Democrats. Various Republican groups are also likely to be wary of a bill that includes deep mandatory cuts or any debt ceiling raises.
President-elect Donald Trump speaks to reporters on New Year's Eve at his Mar-A-Lago club in Palm Beach, Florida. (Eva Marie Uzcategui/Getty Images) ·Eva Marie Uzcategui via Getty Images
And Johnson — who this week is in a fight to retain his speaker's gavel — may be required to offer more concessions to this group in order to amass votes.
On Thursday, Punchbowl News reported that Chip Roy, a Texas Republican and member of that group of 29, is set to hold significant sway over Johnson’s fate. It reported that Roy could extract concessions either through rule changes or even by being named to head a powerful rules committee.
"If you want to get a promise from Mike Johnson, you are going to want to get it in the next 24 hours." Wendy Schiller, professor of public affairs at Brown University, said in a Yahoo Finance video interview Thursday morning.
She added that what could perhaps be in jeopardy in the back-and-forth could be "a safe debt ceiling approval later this spring."
Trump's own position on the debt ceiling issue is further complicated by the fact that he has often seemed to endorse a default when it would hurt his political opponents.
"I say to the Republicans out there — congressmen, senators — if they don’t give you massive cuts, you’re going to have to do a default," he offered as recently as 2023 as the GOP faced off against a Democratic White House.
Next steps for the debt itself
As the politics of the situation come into focus, the mechanics of the debt limit itself will begin to be felt within days.
On Dec. 27, Treasury Secretary Janet Yellen wrote a letter to congressional leaders explaining that the federal government will likely need to begin moving around cash in what are called "extraordinary measures” sometime between Jan. 14 and Jan. 23.
After that, it will essentially be an educated guessing game about when the moment comes that the effect of these measures run out — and a market-rattling default could be in the offing.
That’s an estimate that Trump himself appears to have taken to heart, often citing June as the deadline.
But the paper was quick to note that "it is entirely possible that the debt ceiling will be reached prior to June 16, and the Congress will need to act earlier than many are expecting."
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance's Rachelle Akuffo, Rick Newman, and Ben Werschkul bring you a unique look at how U.S. policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
