Some Preliminary Thoughts on the Upcoming Debt Ceiling and Government Funding Crises
Last week, I teased yet another column about the Democrats' internal battles in the aftermath of Senator Chuck Schumer's wise refusal to give the Musk-Trump Administration the gift of a government shutdown, parenthetically offering this: "Side note: I will be returning again to the ongoing Schumer fallout on Monday." Those waters are still roiling even at this very moment, but because I expect all of that unpleasantness (unfortunately) to continue into the indefinite future, I am going to put that column off until next Monday at the earliest.
Instead, I want to start to think today about two massive budgetary battles that will soon threaten the country, either one of which could be cataclysmic in its effects on the US and global economies -- to say nothing of the now-expected constitutional crises that they could trigger. Perhaps surprisingly, the reason to think about these potential blowups now is related to the Democrats' intramural fight about the anti-shutdown vote, because they will present situations in which "putting up a fight" might again be viscerally appealing but could be exactly the wrong thing to do. Or maybe not. Again, these are preliminary thoughts.
The first issue is the debt ceiling, which will put the country on crisis watch sooner than the next funding showdown. The federal government's "extraordinary measures" (a term that has become the biggest misnomer in US politics in the last few years, given how often these measures have been used) will run out sometime between now and August.
I would normally search for a recent estimate from one of the less annoying budget watchdog groups to provide a drop-dead date for reference, but that is even less useful than usual this year. The truly extraordinary new curveball facing the Treasury is the uncertainly caused by the Trump Administration's efforts to cut the IRS's staff and budget. There is already reporting that people are noticing that this year could be a very good time to cheat on their taxes, which means that the usual methods to forecast revenue inflows in the coming crucial month of April are out the window.
How much of a problem is there? I googled "more americans planning to cheat on their taxes in 2025" and had hits including "Trump's IRS Cuts Are Tempting Taxpayers to Cheat" from Bloomberg, "IRS layoffs of 7,000 may cut revenue collection and foil efforts to snag rich tax dodgers, experts say" from Forbes, and "With IRS layoffs, will cheating on tax returns increase?" from USA Today.
So what will happen whenever the drop-dead date arrives? The short answer is that the debt ceiling should be repealed. Even Trump has said that he wanted that. Let us assume, however, that the muscle memory among House Republicans to refuse to vote for debt ceiling increases removes enough votes to prevent Republicans from passing a repeal bill (or, as less good alternatives, a suspension or increase in the debt ceiling). During Barack Obama's and Joe Biden's presidencies, the Democrats would all vote to make the debt ceiling problem go away (for awhile). What will they do when Trump is in the Oval Office? What should they do?
Back in December, Senator Elizabeth Warren volunteered the idea that Democrats should again vote to increase the debt ceiling, because the debt ceiling is a terrible law and can only do damage. She reiterated that sentiment during confirmation hearings for Trump's Treasury Secretary nominee on January 15, 2025. Is that still true? Imagine that we are one minute before midnight when the "trilemma" will hit -- that is, federal payments the next day will exceed the incoming revenues that day by an amount exceeding the available room under the debt ceiling. What are the options?
If Democrats refuse to provide the votes to increase the debt ceiling, the Buchanan-Dorf analysis says that any President would be constitutionally obligated to pay the bills as they come due and borrow the money necessary to cover the difference on financial markets, even though that would exceed the debt ceiling. Our law review articles offer several reasons for this, but the primary factor is that violating the debt ceiling is the option that best preserves the separation of powers. Any effort to "prioritize" obligations, with the White House picking and choosing which IOU's are to be paid while stiffing the unlucky other obligees, simply gives the President too much power -- power that the Constitution vests in Congress.
But this brings us back to the "fight for the sake of appearing to fight" question once again. Democrats could say, "Our supporters have been telling us to stand firm against Trump and stop making deals, so you Republicans can either whip the votes to neutralize the debt ceiling on your own or suffer the consequences." What would those consequences be, and who would suffer them?
Trump would love to be able to pick winners and losers, so even though he apparently believes that his life is more difficult in a world with a binding debt ceiling, that might in fact be his dream scenario. He could say, "Well, now I don't have any choice but to honor the debt ceiling, and doing so just happens to give me even more discretion than I already claimed to have." He is constitutionally forbidden from doing so, but this is Donald Trump we are talking about. He is not going to confab with the principals on this blog to decide whether to take control of federal spending.
Indeed, as I noted in a column more than ten years ago (!), because a President must refuse to seize power when Congress creates a trilemma, he certainly must not create a trilemma himself in order to exploit the crisis. But again, Trump might well seize such an opportunity. That would mean that any member of the House or Senate would know that voting to neutralize the debt ceiling would be pointless, because Trump would have an incentive to veto it no matter whether it is Republican votes alone or Democrats joining with Republicans in a vain effort to limit Trump's power.
Why did we not see Obama or Biden do that? Because they both rightly feared a huge downside to a constitutional crisis, with the creditworthiness of the United States on the line. If a trilemma were ever to become a reality, the President by definition would be violating at least one law, and no matter whether the President did the right (Buchanan-Dorf) thing or wrongly stiffed some creditors, the markets would go crazy, and it would be truly unknowable what the Supreme Court might ultimately decide. Avoiding the trilemma was the only sane option, for presidents who valued stability.
Trump, in case no one else has noticed, is different. He said two days ago that he "couldn't care less" if tariffs increase car prices. He has said that the tanking of financial markets since he returned to office is a blip, merely short-term pain that is worth inflicting in order to reach his promised nirvana. A debt ceiling crisis would allow him to consolidate power even more aggressively, and it is difficult to see why he would suddenly show restraint.
Where does that leave Democrats? If they refuse to vote to increase the debt ceiling, they can be blamed for giving Trump the opening to intensify his corrupt doling out of federal dollars to favored recipients while punishing his enemies. If they vote to increase it, however, they (1) will be accused of collaborating with Trump, and (2) will probably end up looking like chumps when Trump vetoes the bill. The very best case for Democrats would be to vote to increase the debt ceiling and have Trump not veto the bill, because then they would "only" look like gutless collaborators rather than feckless dupes as well.
Imagine, however, that for some reason the debt ceiling is somehow neutralized, allowing the country to move forward to the end of the fiscal year on September 30, when the continuing resolution (CR) that caused so many Democrats wrongly to vilify Schumer will expire. Assuming that both the House and the Senate are still controlled by Republicans at that point (not entirely a sure thing, at least in the case of the House), Republicans will again put together their own appropriations bills without any input from Democrats. The resulting budget plan will surely be even worse than the current CR, but at least it would be a law that the courts could enforce.
And that is precisely the problem that no one is currently understanding, This month's CR was terrible, but it needed to be passed on the slim remaining hope that the rule of law still exists in the US going forward. Without a budget being passed by September 30, we would be right back in the shutdown world in which Trump and Musk could further shred the government without being accused of breaking the law, because the necessary appropriations laws would not even have been passed.
This in turn raises an even more sneaky possibility. If Republicans wish, they can use the so-called reconciliation process to pass their 2026 budget with zero Democratic votes, even in the Senate (because reconciliation bypasses the 60-vote requirement in the upper house). But why not truly put the political screws to the Democrats and present them again with a terrible choice: vote for a cruel budget that is at least a budget, or vote no and shut down the government, perhaps permanently? Democrats are already at each others' throats after month's CR-or-shutdown vote, so a truly Machiavellian Republican leadership would surely want to put them through all of that again.
What is the bottom line? So long as there are no Republican defections, they can pass anything they want without Democrats' votes. More importantly, Republicans' unity will guarantee that Trump will be off the leash. That means that Democrats will have no leverage at any stage of the process of writing laws, and the only question will be how adroitly Republicans are able to force Democrats into votes that further convince voters that Democrats have no fight in them.
Most notably, no change in leadership or strategy by the Democrats can change any of that, so long as they are the minority party. So elections still have consequences, and so do Supreme Court decisions allowing gerrymandering and voter suppression to create an ironclad governing minority in the United States.