Capitol Hill braces for high-stakes showdown over $36T US debt crisis

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FIRST ON FOX: A potential showdown over the U.S. debt limit is projected to hit Capitol Hill by mid-June, a new calculation suggests.

The Economic Policy Innovation Center (EPIC) released a new model Monday that said it is "possible" the U.S. government would exhaust the ability to pay its debts by June 16, 2025.

"The government is projected to run about a $2 trillion deficit next year. And so that means that the spending obligations that Congress and the government have incurred are a lot more than what we're going to bring in tax revenues," Matthew Dickerson, director of Budget Policy at EPIC, told Fox News Digital. "To be able to pay the things the government has promised to pay on time, you need to increase the debt limit."

An agreement struck by President Biden and former House Speaker Kevin McCarthy, R-Calif., last year suspended the debt limit through January 2025. In that time, the national debt surpassed $36 trillion.

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A possible showdown over raising the debt limit looms on Capitol Hill.

EPIC’s analysis projected that "extraordinary measures" that can be invoked by the Treasury Department to avoid national default can carry the U.S. for roughly six more months at most, until a day known as the "X-date."

Failure to raise the debt limit could lead to major spirals in the U.S. and global economies. 

Biden and McCarthy’s deal was struck in late May of last year, just days ahead of a projected federal default on June 5. By that point, credit agency Fitch had already downgraded the U.S.’ longstanding AAA credit rating to AA+, temporarily roiling domestic financial markets.

When asked if he was bracing for another 11th-hour agreement, Dickerson pointed out that Congress already has a litany of urgent legislative priorities to start off next year even before debt limit talks.

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"It's going to be a struggle for Congress to be able to deal with this," he said.

However, those negotiations can also be an ideal opportunity for Republicans to negotiate major deficit reduction ideas into law, EPIC's paper argued.

President Biden, right, and former House Speaker Kevin McCarthy famously had a monthslong standoff over the debt limit. (AP Photo/J. Scott Applewhite / Carolyn Kaster, File)

"Reaching the debt limit should be a wake-up call and a signal to do something, sound the alarm," Dickerson said.

The report said debt limit talks "historically helped facilitate the political environment needed for deficit reduction agreements, presenting an opportunity in 2025 to pair necessary debt limit increases with reforms to control spending and promote economic growth."

It went on to blame the ballooning national debt on "excessive spending."

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"Since August 2019, the debt limit has been modified four times: two suspensions and two dollar-specific debt limit increases. Over these five years, the debt has grown by about $13.9 trillion," the report said. "The current fiscal trajectory, where government spending would exceed historical norms and grow faster than the economy, is unsustainable and harmful to American families."

The debt ceiling is the total amount the federal government is able to borrow in order to pay its obligations, including Social Security, Medicaid and Medicare, and veterans’ payments – among countless other payments.

The talks that led to suspending the debt limit last year were part of a messy, protracted battle over government spending that fueled chaos in the 118th Congress.

In addition to dealing with Democratic demands to raise or suspend the debt limit with no preconditions, McCarthy also faced pushback from GOP hardliners who opposed acting on the fiscal cliff without steep spending cuts – which were non-starters for most on the left.

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Additionally, while the players will be different next year – President-elect Donald Trump instead of Biden, McCarthy replaced by House Speaker Mike Johnson, R-La., and Republicans flipping the balance of power in the Senate – Dickerson pointed out that the GOP’s slim margins in Congress will mean Democrats will still need a seat at the negotiating table.

"You’re going to need to be able to have something that brings along everybody so we can get a bipartisan agreement," he said, while also adding, "President Trump is going to not want to sign something that is seen as massively increasing spending and being irresponsible on debt."