Donald Trump issues Great Depression warning
President-elect Donald Trump has suggested that the U.S. could face a “depression” as he attacked a debt ceiling deal agreed by former House Speaker Kevin McCarthy.
Congress suspended the debt ceiling until January 1, 2025, under the 2023 deal. But lawmakers will need to take action in 2025—likely after Trump is back in office—to raise the debt limit again to prevent the U.S. from defaulting on its obligations.
Trump, who failed to get a provision raising the debt ceiling included in a stopgap spending bill passed by lawmakers earlier this month, railed against the likelihood that Republicans will have to deal with the issue next year.
He called for lawmakers to address the issue while President Joe Biden, a Democrat, is still in office.
A Trump spokesperson has been contacted for further comment via email.
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Why It Matters
Lawmakers have always managed to raise the debt ceiling in time because otherwise the government would go into default on its obligations—which economists broadly agree would have dire economic consequences.
Economists have previously warned that even a near default could spark a recession.
What To Know
After weeks of negotiations in the summer of 2023, lawmakers passed the Fiscal Responsibility Act, which suspended the nation’s debt limit through January 1, 2025.
The debt ceiling, or debt limit, is the total amount of money the U.S. government can borrow to meet its existing legal obligations. The national debt is currently at about $36 trillion, according to the Treasury Department.
After January 1, the Treasury can use what it calls “extraordinary measures” to ensure the U.S. does not default on its debts.
In a letter to congressional leaders on Friday, Treasury Secretary Janet Yellen said her agency may need to start taking “extraordinary measures” by as early as January 14 to prevent the U.S. from defaulting on its debt.
She urged lawmakers to “act to protect the full faith and credit of the United States.”
Some economists have estimated that these measures could move the deadline to raise the debt ceiling to June 2025—something Trump wants to avoid since it will be when he is president and could affect his agenda.
He had demanded that a provision raising or suspending the debt ceiling be included in legislation passed earlier in December to avert a government shutdown. Republican lawmakers complied, but the bill failed to pass in a House vote.
Biden ultimately signed a bill into law on December 21 that funds the government at current levels through March 24 without a debt limit provision.
“It was Biden’s problem, not ours. Now it becomes ours. I call it ‘1929″ because the Democrats don’t care what our Country may be forced into,” Trump wrote on Truth Social, referring to the year the Great Depression began.
“In fact, they would prefer ‘Depression’ as long as it hurt the Republican Party. 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!”
What People Are Saying
Trump and Vice President-elect JD Vance said in a recent statement: “Increasing the debt ceiling is not great, but we’d rather do it on Biden’s watch. If Democrats won’t cooperate on the debt ceiling now, what makes anyone think they would do it in June during our administration? Let’s have this debate now.”
Yellen in her letter to congressional leaders: “Treasury currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures. I respectfully urge Congress to act to protect the full faith and credit of the United States.”
Biden said in a statement on December 21 that the stopgap spending bill “represents a compromise, which means neither side got everything it wanted. But it rejects the accelerated pathway to a tax cut for billionaires that Republicans sought, and it ensures the government can continue to operate at full capacity.”
What’s Next
Republicans will control both chambers of Congress from January 3, but it’s not clear if they will vote on the debt ceiling before Trump takes office on January 20.
Yellen said the Treasury could begin deploying “extraordinary measures” by as early as mid-January, which will allow it to meet obligations for several months before Congress will have to address the issue.
