The debate over the debt limit will likely flare tensions between centrist and far-right Republicans the closer the country gets to the real deadline sometime later in the year. (Photo by Getty Images)

WASHINGTON — When Republicans won unified control of government during the November elections, they also won the responsibility to address the country’s debt limit after the current suspension expires on Jan. 1.

Lawmakers will have a few months of wiggle room thanks to accounting maneuvers to broker a deal before the country would default for the first time in history — which most economists believe would kick-start a global financial crisis.

How long the Treasury Department will be able to use what’s known as extraordinary measures to give Congress more time to find agreement will lead to a high-stakes guessing game on Capitol Hill.

The debate will also likely flare tensions between centrist and far-right Republicans the closer the country gets to the real deadline sometime later in the year.

“That is always a tortured path,” West Virginia Republican Sen. Shelley Moore Capito said during a brief interview. “A lot of people that are here probably never voted for a debt limit increase, so I think it’s probably going to be a negotiated settlement with some, maybe constraints on spending and other things that would go along with that.”

Capito, who will become the Republican Policy Committee chair next year, said she doesn’t anticipate Congress will simply raise or suspend the debt limit without caveats.

President-elect Donald Trump threw a curve ball into those negotiations in late December when he publicly announced he wanted the party to suspend the debt limit for at least four years or eliminate it entirely before he takes office.

GOP leadership tried to suspend the debt limit for two years as part of a larger spending package, but ultimately withdrew that provision to avoid a government shutdown.

The 48-hour fiasco set the stage for considerable Republican disagreement next year.

“Congress must get rid of, or extend out to, perhaps, 2029, the ridiculous Debt Ceiling,” Trump posted on social media. “Without this, we should never make a deal. Remember, the pressure is on whoever is President.”

What is the debt limit, and why does it matter?

The debt limit allows the Treasury Department to borrow money to pay all the country’s bills in full and on time.

That borrowing authority is necessary because Congress has established a tax code that brings in far less revenue than the federal government spends on hundreds of programs.

During fiscal year 2023, the federal government brought in $4.4 trillion in revenue and spent $6.1 trillion, leading to an annual deficit of $1.7 trillion, according to data from the nonpartisan Congressional Budget Office.

When the difference between taxes and spending, or the deficit, is added up over decades, it accounts for the country’s $36 trillion-plus debt.

Congress requires itself to regularly give the Treasury Department more borrowing authority to pay for all the spending not covered by revenue. Lawmakers failing to take action to raise or suspend that debt limit would lead to a default.

How to reduce the deficit?

There are several ways for lawmakers to reduce the annual deficit of nearly $2 trillion, though most experts agree it will take a combination of tax increases and spending cuts.

Congress would also need to take a look at the major drivers of government spending — Social Security, Medicare and Medicaid.

At the moment, Republicans are talking about using their unified control of government to pass two major packages on their own.

The first would focus on border security, defense and energy policy. The second package the GOP plans to move through the complex budget reconciliation process is aimed at cutting taxes.

One of the biggest questions GOP leaders will face in the new year is whether to go at it alone, relying solely on their members to raise the debt limit, or to negotiate with Democrats, which would require major concessions.

The debt limit has become something of a political hot potato for GOP lawmakers during the past couple decades, with many in the party viewing it as an inflection point to press for spending cuts. 

That’s not likely to change next year, though Republicans won’t be able to rely on Democratic votes to carry the bill across the finish line like they have in the past, if they choose to move it through the budget reconciliation process.

If, alternatively, the GOP moves a debt limit bill through the regular process, they’ll need the support of Democrats to get past the Senate’s legislative filibuster, which requires at least 60 senators to move bills toward a final passage vote.

Tax increases and spending cuts

Douglas Elmendorf, professor of public policy at the Harvard Kennedy School of Government, told the House Budget Committee during a hearing in December that getting the country’s borrowing under control in the long term will require both tax increases and spending cuts.

Elmendorf testified that stabilizing the country’s deficit over the next three decades would “require policy changes totaling a little more than 2% of (gross domestic product), which amounts to about $600 billion per year today.”

“Cutting spending that much would require large cuts to popular and important government programs and raising taxes that much would require large tax increases for many people,” Elmendorf said. “So the only realistic way forward is through a combination of those changes.”

California Republican Rep. Tom McClintock rebuked his own party during the hearing for not approaching reconciliation as a genuine way to reduce the deficit by bringing revenue and spending into alignment.

He argued that Republicans misused budget reconciliation when they had unified control of government during 2017 and 2018, the first two years of Trump’s last presidency.

McClintock said GOP leaders at the time “squandered this authority to chase shiny political objects — repealing Obamacare, then tax reform.”

“And because of the fiscal constraints of reconciliation, Obamacare ended up in this mangled mess that collapsed in the Senate and the tax cuts had to be made temporary,” McClintock said. “And we seem to be poised to repeat the same mistakes that got us here and that would be an immense national tragedy.”

Instead, McClintock said the Budget Committee should focus its attention next year on making the types of tough choices that would begin to reduce the annual deficit and then use the reconciliation process to put those in place.

Drivers of debt

Reconciliation is typically used only when one party controls the House, Senate and White House as a way to implement policy changes without getting the bipartisan support required to get past the Senate’s 60-vote legislative filibuster.

When Republicans hold that power, they typically use it to cut taxes, but don’t always pay for those reductions in revenue, further exacerbating the deficit.

Georgia Republican Rep. Buddy Carter said during the same Budget Committee hearing that Congress must address the largest drivers of government spending, like Social Security, Medicare and Medicaid, if it wants to bring spending closer to revenue. 

“If we don’t address that, we can do away with everything else and still not balance our budget,” Carter said. 

He also cautioned his party against going at it alone, saying “it would be political suicide for one party to try to do it by themselves.” That would mean the GOP needs to negotiate with Democrats, likely eroding some of the party’s goals.

‘Mortgaging our children’s future’

Wisconsin Republican Sen. Ron Johnson said during a brief interview the debt limit is “supposed to concentrate everybody’s minds on the fact that we are mortgaging our children’s future and that we ought to stop the madness.”

Johnson said Republicans could use the reconciliation process they’re planning to use to address defense priorities, border security, energy policy and taxes to cut spending, but he said deficit hawks will be constrained by the rules that govern the special legislative process.

“I’m completely supportive of doing two separate reconciliations — do something pretty simple, primarily focused on the border with real spending cuts. I don’t want to see any gimmicks in this thing. So, you know, I’ll approach it that way,” Johnson said.

Iowa Republican Sen. Chuck Grassley said in an interview before Trump’s announcements that GOP lawmakers have begun to discuss how exactly to address the debt limit next year, though he said no agreements have been reached.

“Some people want a separate debate on it and some people want to put it in reconciliation,” Grassley said. “I prefer reconciliation, but I guess whatever we decide to do, we’re going to have to do it.”

Tesla CEO Elon Musk , right, co-chair of the newly announced Department of Government Efficiency, carries his son on his shoulders at the U.S. Capitol following a meeting with businessman Vivek Ramaswamy, left, the other co-chair of the Department of Government Efficiency, Rep. Kat Cammack, center, and other members of Congress on Dec. 5, 2024 in Washington, D.C. Musk and Ramaswamy met with lawmakers about DOGE, a planned presidential advisory commission with the goal of cutting government spending and increasing efficiency in the federal workforce. (Photo by Anna Moneymaker/Getty Images)

WASHINGTON — President-elect Donald Trump enlisted Washington outsiders Elon Musk and Vivek Ramaswamy to tell members of Congress how they should run things.

But Musk and Ramaswamy as they build their Department of Government Efficiency, or DOGE, don’t actually hold any elected or bureaucratic positions in the federal government — giving two hard-driving businessmen far less authority than they’re used to having in the private sector.

The duo will need to garner support from hundreds of members of Congress for any of their suggested spending cuts to become law, even with Republicans in control of the White House and both chambers of Congress. That is an uphill slog many have failed at before.

The mix of personalities, differing committee jurisdictions and separation of powers laid out in the Constitution could create tension, to say the least, when powerful Republican lawmakers disagree with or outright ignore Musk and Ramaswamy. Several Republicans indicated in interviews with States Newsroom that they intend to listen to the DOGE duo but will not back down from their roles as elected representatives of the people.

Maine Republican Sen. Susan Collins, the incoming chairwoman of the Appropriations Committee, said during a brief interview she believes the two men can offer lawmakers “valuable insights” and advice, but cautioned the power of the purse rests with Congress.

“It doesn’t mean that we will take all of these issues, but it’s always helpful to have additional oversight,” Collins said. “And so I look forward to seeing what they come up with.”

Rhode Island Democratic Sen. Sheldon Whitehouse, chairman of the Budget Committee, summed up Democrats’ views on the Musk-Ramaswamy entity in a social media post.

“What does Doggie (“DOGE”) do? Maybe think of it this way: you have to watch a couple of precocious toddlers for the day,” Whitehouse wrote. “They need activities, but you don’t want them near stoves, cars, electrical equipment, or anything operational.”

Meet the appropriators

In Congress, the Appropriations Committee is tasked with drafting the dozen annual government funding bills that total about $1.7 trillion. The legislation funds the vast majority of federal departments and agencies, including Agriculture, Defense, Energy, Interior, Justice, State and Transportation.

The other two-thirds of federal spending covers interest payments on the debt, Social Security, Medicare and Medicaid.

Idaho GOP Rep. Mike Simpson, chairman of the Interior-Environment Subcommittee, told States Newsroom he expects there will be “conflict” between Congress and the Musk-Ramaswamy group, in part, because they don’t have the years, or even decades, of experience learning the ins and outs of federal spending that appropriators hold.

“I noticed that they’ve said that they want to defund public television. I think they might get some kickback on that,” Simpson said. “To me, that’s a policy decision, not an efficiency issue.”

When GOP lawmakers met with Musk and Ramaswamy behind closed doors in early December to talk about government spending, Simpson said, the two pressed the idea that Trump should be able to cancel spending he deems “waste.”

But what Trump might consider unnecessary could be an essential program to a GOP lawmaker or a rural community, Simpson said.

There’s also a federal law called the Impoundment Control Act that prevents presidents from halting funding that Congress has approved and a Supreme Court ruling that bars the president from using line-item vetoes.

Arkansas Republican Rep. Steve Womack, chairman of the Transportation-HUD Subcommittee, told States Newsroom he expects there will need to be some “deconfliction” once Musk and Ramaswamy release their proposals.

“There will be a lot of different, competing interests and ideas, and we’ll just have to see what those are,” Womack said. “It’s a little premature, but, yeah, I’m sure there’ll be some deconfliction, there’ll be some negotiating. Some of this will be leveraged with other significant emotional events up here like debt ceiling, or funding the government.”

Floor votes could also be a hurdle for the various DOGE groups if they don’t gain Democratic support. Republicans will hold just 220 seats in the House at the start of the 119th Congress before a few of their members depart for other opportunities. That razor-thin margin means proposals from Musk and Ramaswamy will need support from the full spectrum of GOP lawmakers to pass.

Then they’ll need to gain the support of nearly all 53 GOP senators if they expect any spending cuts proposals to become law through the complex budget reconciliation process. 

Proving their value

One of the many challenges for Musk and Ramaswamy will be showcasing how their efforts differ from those of the White House budget office.

Bipartisan Policy Center Managing Director for Economic Policy Rachel Snyderman said in an interview with States Newsroom she’ll be watching closely to see whether Musk and Ramaswamy integrate their proposals with the president’s budget request, which the White House will likely release sometime in the spring.

That massive document tells Congress how the president wants lawmakers to change tax and spending policy. Congress, however, rarely follows it to the letter and often ignores large swaths of it.

If Musk and Ramaswamy’s proposals go a completely different route, it could create confusion about what exactly it is the Trump administration wants lawmakers to do and could bog down any support they might get on Capitol Hill.

But simply mirroring what’s already in the budget request would lead to a question about whether or not Musk and Ramaswamy serve any real purpose.

“If you go back and look at the budgets from Trump’s first term … they averaged about $1.6 trillion in cuts over a 10-year budget window,” Snyderman said. “And at least for the first two years, those were presented to a GOP trifecta as well and not implemented as policy.”

Snyderman said Musk and Ramaswamy will likely want to do something other than reinvent the wheel by simply republishing the hundreds of government efficiency and spending cuts proposed over the years by the Congressional Budget Office, the Government Accountability Office and inspectors general.

Those groups have given lawmakers and presidents plenty of recommendations to reduce waste, fraud and abuse. But government officials don’t always act on their suggestions.

“There have been so many resources over the years doing just this — proposing smart, sensible, but tough pills to swallow when it comes to government efficiency,” Snyderman said. “What I think it’s going to really boil down to is what’s politically palatable through legislative or executive action. And where as a nation we’re willing to make those trade-offs in service to improve our fiscal outlook and trying to get a handle on the national debt.”

One of the more recent examples, she said, was the nonpartisan Congressional Budget Office’s release of a detailed, 116-page report on ways that lawmakers could reduce the deficit in mid-December.

Impoundment law

If Republicans disagree with Musk and Ramaswamy’s suggestions or only put a few of them in place, it could lead Trump to try to cut spending unilaterally.

Such a decision would create considerable issues for Republicans, since it would violate the Impoundment Control Act and potentially set a new precedent that future Democratic presidents could use to ignore Congress on conservative spending priorities.

That Impoundment Control Act, enacted after then-President Richard Nixon refused to spend billions approved by lawmakers, essentially says a president must distribute money Congress has approved for various federal departments and agencies. It also gives the president a couple of paths to ask lawmakers to cut spending they’ve already approved, but they must agree.

Russ Vought, who has been nominated as director of the Office of Management and Budget, is likely to press the belief that presidents can unilaterally cancel spending, often called “impoundment.”

The Center for Renewing America, the think tank Vought established following his stint as OMB director during the first Trump administration, has repeatedly argued the Impoundment Control Act is unconstitutional and published a detailed history of how presidents canceled spending before the 1974 law took effect.

The Trump administration ignoring the ICA would likely lead to legal challenges and eventually a Supreme Court ruling.

Checks and balances

North Dakota Sen. John Hoeven, the top Republican on the Agriculture Appropriations Subcommittee, told States Newsroom some of the government efficiency proposals that Musk and Ramaswamy pursue will be able to move through executive action, but said any spending cuts must go through Congress.

“This is a country of 320 million people that all have a different point of view about all these different issues, which is why you’ve got to have the kind of process we have, the checks and balances and all that — to figure out where is there enough support to implement these recommendations,” Hoeven said. “That’s how the system works because you’re talking about something that’s very far-reaching and it’s going to affect people throughout the country.”

Arkansas Sen. John Boozman, the top Republican on the Military Construction-VA spending subcommittee, said he expects there will be a lot of communication between lawmakers, Musk and Ramaswamy about constitutional authority to try to avoid public disagreements, though he didn’t rule that out.

“I think as long as the communication lines are open, we should hopefully end most of that,” he said.

Incoming Senate Majority Leader John Thune, R-S.D., said during a press conference he expects it will take some time for Musk and Ramaswamy to “scrutinize government operations and figure out where we can achieve savings and efficiencies” before Congress reviews those recommendations and puts them in a bill.

Thune said he would like to see some of those move through the budget reconciliation process that Republicans are planning to use to get around the Senate’s 60-vote legislative filibuster; essentially allowing the GOP to move sweeping policy changes without Democratic input.  

More cooks in Congress

Republicans have talked about cutting government spending for decades, but haven’t used unified control of government to make significant structural reforms in quite some time.

Newly formed groups in the House and Senate will likely provide some support for Musk and Ramaswamy’s proposals, but they may disagree with them as well, or come up with completely separate ideas.

The combination of Musk and Ramaswamy’s DOGE, a soon-to-be-formed House Oversight subcommittee on government efficiency chaired by Georgia Republican Rep. Marjorie Taylor Greene and the government efficiency caucus could become a too-many-cooks scenario.

The Delivering Outstanding Government Efficiency Caucus already holds several Republican lawmakers among its ranks, but it doesn’t have the jurisdiction that the Appropriations Committee holds. Neither does the Oversight subcommittee.

Iowa Republican Sen. Joni Ernst established the caucus alongside Florida Rep. Aaron Bean and Texas Rep. Pete Sessions

North Carolina’s Ted Budd, Texans John Cornyn and Ted Cruz, Oklahoma’s James Lankford, Utah’s Mike Lee, Kansan Roger Marshall, Ohio’s Bernie Moreno, Missouri’s Eric Schmitt, Florida’s Rick Scott and Alaska’s Dan Sullivan have all joined the group on the Senate side.

House members include Rick Allen of Georgia, Jim Baird of Indiana, Andy Barr of Kentucky, Stephanie Bice of Oklahoma, Josh Brecheen of Oklahoma, Ben Cline of Virginia, Jeff Duncan of South Carolina, Ron Estes of Kansas, Pat Fallon of Texas, Randy Feenstra of Iowa, Scott Franklin of Florida, Carlos Giménez of Florida, Glenn Grothman of Wisconsin, Diana Harshbarger of Tennessee, Doug LaMalfa of California, Nick Langworthy of New York, Debbie Lesko of Arizona, Barry Loudermilk of Georgia, Anna Paulina Luna of Florida, Celeste Maloy of Utah, Tom McClintock of California, Cory Mills of Florida, Dan Newhouse of Washington, Ralph Norman of South Carolina, Gary Palmer of Alabama, David Rouzer of North Carolina, Mike Rulli of Ohio, Maria Elvira Salazar of Florida, Jeff Van Drew of New Jersey, Beth Van Duyne of Texas, Derrick Van Orden of Wisconsin, Tim Walberg of Michigan, Randy Weber of Texas, Daniel Webster of Florida, Roger Williams of Texas and Joe Wilson of South Carolina. 

Workers sort peaches at a packing house after they were harvested from the trees of a Georgia farm in July 2023. Georgia has work requirements under its partial expansion of Medicaid, but its program has fallen far short of enrollment projections and has cost more than $26 million. (Joe Raedle/Getty Images)

Trevor Hawkins, an attorney at Legal Aid of Arkansas, remembers how busy his job got when the state for a time imposed work requirements on Medicaid recipients: His office was swamped with frantic phone calls from people who said they couldn’t comply with the new rule because they weren’t healthy enough to work or had to care for sick relatives.

“A whole heap of folks, after a month or two, started getting notices saying, ‘Hey, you’re out of compliance, and you’re going to lose your coverage,’” Hawkins told Stateline. For many people, he said, keeping their coverage was “absolutely vital to maintaining their health or getting better so they might work again.”

In June 2018, Arkansas became the first state to require some Medicaid recipients to work, volunteer, go to school or participate in job training to receive benefits. By the time a federal judge halted the policy in April 2019, 18,000 adults had lost coverage.

Arkansas was one of 13 states that received permission to impose work rules on at least some Medicaid recipients during the last Trump administration. Nine additional states requested permission to enact Medicaid work requirements during Trump’s term but had not won approval by the time it ended.

When the Biden administration came into office, it rescinded all the approvals. But now that Trump is coming back, many of those states will try again — and they’ll have a supportive U.S. Congress in their corner.

Republicans on Capitol Hill are eager to find ways to pay for extending tax cuts enacted during Trump’s first term in office, and Medicaid — funded jointly by the federal government and the states — is in their sights. Requiring states to establish Medicaid work rules, as many Republicans would like to do, would cut federal spending by an estimated $109 billion over a decade, according to the Congressional Budget Office. That’s because the cost for about 900,000 people would shift entirely to states, while another 600,000 people would become uninsured, CBO estimated. About 72.4 million people are enrolled in Medicaid.

Arkansas renewed its efforts even before Trump’s victory. Last year, Republican Gov. Sarah Huckabee Sanders requested federal approval from the Biden administration to apply work rules to able-bodied adults who are covered through the state’s expansion of Medicaid under the Affordable Care Act, and who are enrolled in health plans that Arkansas Medicaid purchases for them on the state’s health insurance exchange. That application is pending.

Georgia, after prevailing in a legal fight with the Biden administration, already has work requirements in place for people covered by its partial expansion of Medicaid. And Idaho, Mississippi, Oklahoma, South Dakota and Tennessee have pending requests to require at least some of their Medicaid recipients to work.

Meeting requirements

Supporters say requiring Medicaid recipients to work, study or train for a career gives them a boost toward self-sufficiency and financial stability. Kristi Putnam, the secretary of the Arkansas Department of Human Services, said in a statement announcing her state’s latest request that it would challenge people to “embrace economic opportunities that can lead to true job advancement.”

“Meaningful work connects people to purpose — and through the pandemic we have seen negative mental health impacts from people feeling disconnected,” Putnam said.

Critics, however, say such rules end up hurting far more people than they help. In a 2020 study examining how the Arkansas work requirements played out, researchers from the Harvard T.H. Chan School of Public Health “found no evidence that the policy succeeded in its stated goal of promoting work and instead found substantial evidence of harm to health care coverage and access.”

More than 95% of the Arkansas beneficiaries the researchers surveyed already met the work requirement or should have qualified for an exemption. The main reason people lost coverage, the researchers found, was because they had trouble verifying that they were complying with the rules. Many of those who lost their coverage stopped taking their medications, delayed care and fell into medical debt.

“Our results should provide a strong note of caution for federal and state policy makers considering work requirement policies in the future,” the researchers concluded.

Under the rules Arkansas put in place during the first Trump administration, Medicaid participants under age 50 had to report that they spent at least 80 hours each month working, attending school, in job training or volunteering. The rule only applied to people who became eligible after Arkansas expanded Medicaid under the ACA to cover adults making up to 138% of the federal poverty level. And people were exempt if they were pregnant, had a child under 18 at home, were disabled, had to care for a person unable to care for him or herself, were in alcohol or drug treatment, or were in school or job training full time.

About 70,000 of the roughly 270,000 Arkansans on Medicaid were subject to the new rules, and about 1 in 4 of those lost coverage.

Unlike Arkansas, Georgia has not expanded Medicaid under the Affordable Care Act. But its Pathways to Coverage program, launched in July 2023, allows people with household incomes up to 100% of the federal poverty level who aren’t already eligible for Medicaid to enroll in the program if they fulfill work requirements. Georgia’s qualifying activities and exemptions are similar to the ones Arkansas had.

Fiona Roberts, a spokesperson for the Georgia Department of Community Health, told Stateline that as of Nov. 15, there were 5,548 people enrolled in the program and that a total of 7,518 people had been enrolled at some point — evidence, she said, that the program is helping people move from Medicaid to private insurance.

But in its first year, Pathways to Coverage only enrolled about 4,200 people — many fewer than the 25,000 the state had predicted. The cost of the program as of the end of 2023 was $26.6 million, and more than 90% of that went toward administrative and consulting costs, according to KFF, a nonprofit health research group. If Georgia had opted for a full expansion under the ACA, the federal government would have picked up 90% of the tab and the state would have covered about 359,000 people.

Leah Chan, director of health justice at the Georgia Budget and Policy Institute, said work requirements are particularly challenging for people living in rural areas.

“If you don’t have broadband internet at your house, you’re not going to be able to upload the documentation and your pay stubs,” Chan told Stateline. “Even eligible people can’t keep up with it, particularly in rural areas where there are additional barriers to participation.”

‘Learning from mistakes’

Benjamin Sommers, a professor of health care economics at the Harvard T.H. Chan School of Public Health and one of the authors of the Arkansas study, said the experience with work requirements there and in Georgia should give other states pause.

“All that ended up happening was people lost coverage due to red tape, became uninsured, and in some cases, we saw that they had worse access to health care,” Sommers said.

But Arkansas Republican state Rep. Aaron Pilkington, who serves on the health committee in his chamber, said Medicaid work rules are “100% on the table and something we’ll look to ask for from the Trump administration.”

“They can find work and get better health insurance through their employer,” said Pilkington. He said the volunteering and education options make the rules even more attractive.

Meanwhile, in some of the 10 states that have not expanded Medicaid under the ACA, the inclusion of work requirements might be the only way politically to get expansion over the finish line.

“Most of the Democrats I’ve spoken to did not want the work requirements, but to get it passed through the Mississippi legislature it’s most likely going to have one,” Mississippi Republican state Rep. Sam Creekmore told Stateline.

“We’ve looked at Georgia’s plan. We recognize the pitfalls and are hopefully learning from mistakes.”

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Stateline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott S. Greenberger for questions: info@stateline.org. Follow Stateline on Facebook and X.