President-elect Donald Trump warns that the U.S. could plunge into a another great depression if the debt ceiling isn’t addressed soon.
Key Facts:
– The Fiscal Responsibility Act of 2023 suspends the debt limit until January 1, 2025.
– Trump pushed for a debt ceiling provision in December’s stopgap funding bill, but it failed to pass.
– Lawmakers may need to take action by mid-January 2025 to prevent a government default.
– The U.S. national debt is approximately $36 trillion.
The Rest of The Story:
Under a deal reached in 2023, the country’s debt ceiling is on hold until early 2025.
When that date arrives, the U.S. Treasury can use “extraordinary measures” to stave off an immediate default, but these tactics only work for a limited time.
Economists generally believe a failure to raise the debt limit would unleash serious financial trouble.
Trump says that leaving the debt question for Republicans to solve next year will saddle them with a crisis.
He argues Democrats should share the responsibility now, so any difficult steps are taken before a new administration takes office.
Treasury Secretary Janet Yellen has already urged Congress to act soon, stressing the importance of protecting the “full faith and credit” of the United States.
Trump is worried the next debt ceiling fight could trigger another 1929 Wall Street Crash, a catastrophic stock market collapse that marked the beginning of the Great Depression, one of the most severe economic downturns in modern history. pic.twitter.com/ehIpChxfqZ
— @amuse (@amuse) December 30, 2024
Commentary:
Some believe Trump has a valid point: if Democrats delay a solution until 2025, the economy could face a shock that hurts everyone.
A default, or even a close call, can frighten markets, slow spending, and trigger job losses.
The country’s debt load is massive, and high interest payments put stress on the federal budget.
Quick action might avoid a situation where political standoffs push the economy closer to a downturn.
If lawmakers don’t move soon, the nation could be risking a deep financial slump that some fear might be even worse than past recessions.
The Bottom Line:
Trump foresees a grim financial future if the debt ceiling problem lingers.
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Both parties may need to work together faster than planned to spare the U.S. a potential crisis.