The credit rating agency warns of the stagnation of congressional debt limits despite the Republican Party’s majority

The United States is at risk of reaching an impasse on… Debt limit Fitch Ratings warned in a report on Tuesday that Republicans in Congress are dealing with a fragile majority in the House of Representatives.

“The United States faces significant political challenges in 2025 regarding debt limits, allocations, and tax cuts in the context of already large deficits and a growing debt burden.” Fitch wrote. “We believe the debate over increasing or suspending the debt limit is unlikely to be resolved in early 2025 given significant disagreements over spending policies in Congress.

“A pre-Christmas government shutdown was only averted at the last minute, following a contentious debate over President-elect Donald Trump’s insistence on tying funding to a new suspension/increase in the debt limit, and disagreements over certain spending items,” Fitch said. He explained.

Congress recently raised the debt limit in 2023, when Financial Responsibility Law It suspended the debt ceiling until January 1, 2025, and imposed spending limits on discretionary spending. It will likely have to act on a new increase or suspension of debt limits this spring or summer to prevent the federal government from defaulting on its debt.

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Earlier this month, Ministry of Treasury It is estimated that the new debt limit will become binding from January 14 to 23 — which will prompt the agency to use accounting maneuvers known as “extraordinary measures” to avoid default and fund federal obligations for several months until those tools are exhausted.

It is unclear exactly how long Exceptional measures It will continue, but Fitch analysts wrote that they believe “date x” could fall in late July or August, giving lawmakers several months to grapple with the debt limit.

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Aside from the debt limit, Congress would need to pass a Government financing draft law By March 14 to prevent a partial shutdown by enacting either a short-term continuing resolution or appropriations bills.

This discussion may include a discussion of extending discretion Spending limits Which expires in September, and could occur against the backdrop of negotiations on extending the 2017 tax cuts and related reforms that Republicans plan to pursue through the budget reconciliation process.

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The reconciliation process allows tax and spending legislation to bypass a legislative filibuster passed by the Senate by 60 votes and pass by a simple majority as long as the bill complies with special budget rules. Even with that option, it would be difficult for GOP leadership to guide legislation through the process with a narrow majority in the House.

Republicans in the House of Representatives They won 220 seats in the November election, giving them a five-seat majority over the Democrats. However, those ranks have thinned after former Rep. Matt Gaetz resigned, while two more Republican lawmakers have accepted roles in Trump’s next White House.

The departure of these lawmakers will temporarily leave their seats empty until special elections are held for their successors — leaving Republicans with just a two-seat majority in the interim.

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These dynamics could lead to a “busy period over the summer as policymakers attempt to finalize appropriations bills, raise or suspend the debt limit ahead of schedule, and reach an agreement on extending the 2017 tax cuts,” Fitch wrote.

“Our baseline assumptions are that these issues will be resolved. But the absence of a unified budget process and the upcoming political debate on additional tax cuts and spending adjustments amid a still challenging political backdrop means that important decisions are likely to be reached on a case-by-case basis,” Fitch explained. sharpness, highlighting the deterioration of US governance regarding financial matters in recent years.”