Forget The Budget Battle – The Debt Ceiling Is the One to Watch
Democrats face a significant hurdle with the upcoming debt ceiling standoff. And they have an important opportunity to shape the outcome.
The high-stakes drama over funding the government through a continuing resolution might turn out to be something like a Little League championship game compared to what's coming next, and well before the next budget deadline in September: a standoff over the US debt ceiling — expected to hit between May and August, when we hit the so-called X-Date under the current debt limit.
Unfortunately, most Americans still don't understand the dynamics of this dangerous situation, and the murky, shifting political environment doesn't make that any easier. We've been tracking this issue for the last several years, and this is our best estimate of where things are likely heading next.
Republicans do not agree on whether to raise the debt ceiling. Rep. Thomas Massie (R-KY) has been most vocal about not raising the debt ceiling, just as he was about opposing a continuing resolution. Members of the House Freedom Caucus, especially Chip Roy (R-Texas), Dan Bishop (R-NC), Ralph Norman (R-SC), and Andy Biggs (R-Ariz.), have been vocal about opposing any increase of the debt ceiling, favoring spending cuts instead. However, between debt already issued, relatively meagre spending cuts from DOGE and the budget, and extending tax cuts, the debt ceiling will need to be raised to avoid default. Default would lead to a global financial catastrophe that could lead to the loss of at least 6 million jobs and the immediate destruction of $15 trillion in assets (comparable to COVID's total impact, but all at once). It would also lead to a downgrade in US credit and massively increased costs, likely triggering a spiral towards economic collapse.
Democrats will need to align with some Republicans to avoid default. As distasteful as it will be, because the Republicans don't have the votes to pass a debt ceiling increase on their own (due to the opposition mentioned above), Democrats will need to vote with Republicans to pass a debt ceiling bill. The smartest move would be for the Democrats to try to pass a bill eliminating the debt ceiling entirely. It is an unnecessary statutory construct imposed in 1917, and many suggest it is unconstitutional anyway.
While it was passed in the potentially incongruous context of Reconstruction after the Civil War, the Fourteenth Amendment, Section 4, says, “The validity of the public debt of the United States, authorized by law ... shall not be questioned.” The debt ceiling has done nothing but obstruct the will of Congress' duly authorized spending priorities — as specified in the Federal budget.
This is no time for foolish partisanship — if we default on the debt, all Americans will be needlessly harmed, and in ways we can't even predict. Democrats have little to no leverage here since a significant number of Republicans want a default. The best way for Democrats to lead is to start drafting a bill to eliminate or extend the debt ceiling and recruit the small number of Republicans needed to pass it.
Putin, Xi, Musk, Thiel, Libertarians, and many Christian Nationalists want a US debt default. The Kremlin is obsessed with the idea that the Federal Reserve and the US dollar help maintain America's global hegemony by simply printing dollars, which in turn enables American military adventurism. The facts are a good deal more complicated than that, but don't let them get in the way of a good story.
Rep. Thomas Massie (R-KY) has even gone so far as to try to abolish the Federal Reserve, introducing his Federal Reserve Board Abolition Act to “End the Fed” in both 2024 and 2025. This network, which also includes Christian reconstructionist groups, wants to end the fiat dollar and replace it with gold and crypto-based schemes, even as it is likely to be harmful to their interests. But in their worldview, "biblical money" is better than greenback funny-money — and Putin and Xi feel the same way. The desire for a BRICS currency (and a monetary regime some analysts call Bretton Woods III) also aligns with a desire to harm the dollar, even as such schemes are nascent and half-baked.
Dave Troy
While there were efforts to include a debt ceiling measure in the budget bill, it didn't happen. President Trump and several members of Congress were aiming to include a $4.5 trillion debt ceiling increase in the budget resolution, but it didn't end up happening. So this Chekhov's gun remains on the mantle for us to ponder about when and how it might go off. As happened with the budget, it will take significant discipline for Democrats to stay on course and deal with the debt ceiling even as it may seem to be something Trump and some Republicans want. It's the Musk-Putin axis that's material here, and they would be very pleased to see a default happen. To take control of the situation, Democrats should take the lead in crafting a bill and dictating its terms as much as possible, identifying a broad coalition of Republicans and Democrats who want to avoid default.
The Leverage of the Minority
Many people seem to have the idea that being in the minority means doing whatever you can to block the other party in any and every thing they may attempt. But this is both naïve and childish. First, it elides the fact that the opposition is itself divided, and the best way to overpower your true opposition is to find those on the other side that agree with you. That may prove impossible on the vast majority of measures, especially if they are ultimately inconsequential.
But on the debt ceiling, Democrats absolutely must cultivate relationships with Republicans to avoid catastrophe. And those relationships may prove useful later as we slip further into authoritarian rule. Many Republicans are jazzed right now because they think they're winning. They'll be less thrilled when they see their personal and financial security melt away.
No one advocating for a government shutdown “fight” with Republicans seemed to give any thought to how such a shutdown might interact with the debt ceiling X-date, coming up in as little as 60 days, and whether an ongoing shutdown might increase the likelihood of default. It's hard to see how a shutdown would make things better, besides for maybe buy a bit more time. In a shutdown, DOGE would consider itself essential and keep wrecking things, while everything else would be thrown into chaos. All that Democrats stand for would be terminally threatened by default. And if Musk thinks a shutdown would be good for DOGE, full default would be even better still.
Others have rather sensibly proposed that we “tax the rich,” which would help pay down debt (which really isn't the emergency some make it out to be). But such opportunities are not available to the minority party. Democrats need to focus on winning elections — assuming we have meaningful elections again (see #12 here) — and regaining the majority.
Many Democratic pundits today resemble helicopter parents upset with their child's C grade on an exam (when they didn't study) or griping about their kid's lack of time on the field (when they don't come to practice.) For a variety of reasons, Democrats lost the 2024 elections and are thus in the minority. Demanding to speak with the manager is not a winning political strategy.
To navigate this moment, Democrats must assess their true priorities (which can't just be defined in obstructionist terms) and convey them clearly to the public. Map out the factional divisions within their opposition — which do exist, contrary to popular myth. Build coalitions and alliances (tenuously and in secret if necessary) around the handful of issues that matter most. And then execute to avoid default and disaster. That's what exercising power in the minority looks like in 2025. ■
Additional Suggested Reading
Dave Troy
Dave Troy
