On Tuesday, Politico reported that President Donald Trump and House Democrats are gearing up for a fight over the debt ceiling in coming months — a standoff that could ultimately prove to have even higher stakes than the recent federal government shutdown in which the president tried to extract funding for a border wall:
Some top Democrats have begun quietly pushing for a grand bargain to simultaneously raise the debt ceiling and Congress' stiff budget caps — avoiding market turmoil and staving off harsh cuts to domestic and defense programs, according to multiple lawmakers and aides.
But the White House, focused on Trump's reelection bid, is resisting talk of another massive deal that could cost as much as $350 billion over two years. Administration officials, led by Treasury Secretary Steven Mnuchin, are instead pushing for a "clean" debt ceiling hike that extends the federal borrowing limit without making any other policy changes.
Trump's government shutdown, the longest in history, left hundreds of thousands of people with delayed paychecks and led to images of government workers waiting in breadlines.
But a fight over the debt ceiling could potentially have even more significant consequences. Because the debt ceiling is a limit only on the government from making payments on debts, and not accruing debts, a breach of the ceiling could lead to the federal government defaulting on certain payments — destabilizing Treasury bonds and with them the whole global economy on which investment in U.S. debt is based.