Why Trump suddenly cares about the U.S. debt ceiling

As the U.S. Congress scrambled to come up with a spending bill to avoid a government shutdown, U.S. president-elect Donald Trump shocked many lawmakers by demanding that any such bill must also increase the country's debt ceiling.

He insisted that any deal must include that provision for the debt ceiling, the legislative limit on the amount of national debt the country can incur. It's an issue that hadn't been discussed by either party.

Trump then went a step further, announcing, to the surprise of many lawmakers, that he was also seeking to suspend or eliminate the debt limit before he takes office in January.

However, Trump's plans suffered a setback Friday night when the Republican-controlled U.S. House of Representatives passed legislation that would avert a midnight government shutdown, but left out his demand to increase the debt ceiling.

So why is Trump suddenly so concerned about the debt ceiling?

The debt ceiling is the country's borrowing limit. If the government needs to borrow more than that amount, it needs to get congressional authorization to do so. 

Because the government has been racking up deficits — spending more money than the taxpayer revenue it generates — it regularly needs to borrow money and raise that debt limit.

That money is needed so the government can meet its existing legal obligations, including paying social security and Medicare benefits, military salaries, interest on the national debt, tax refunds and other payments.

Many economists have forecast dire consequences as a result of a default, which could include a credit rating downgrade, negative impact on borrowing and the dollar, potential havoc in the financial markets and job losses in the thousands, if not millions — all of which could lead to a recession.

Almost since its inception in 1917, the debt ceiling has been politicized by both parties, but from 2011 onwards, it has become not just partisan but perilous, says Laura Blessing, an adjunct professor and senior fellow with the Government Affairs Institute at Georgetown University.

The biggest problem with the ceiling, according to some observers, is that it has become a dangerous political bargaining chip that holds the economy hostage in order to extract political demands.

"The pattern has been that the Republican Party has enjoyed using this as a cudgel to try to force the Democrats into a legislative deal that would cut spending, which is their policy priority," Blessing said. "And they haven't been particularly successful at doing this."

On Wednesday Trump, in a joint statement with vice-president-elect J.D. Vance, said that "increasing the debt ceiling is not great but we'd rather do it on Biden's watch."

"If Democrats won't co-operate on the debt ceiling now, what makes anyone think they would do it in June during our administration?"