Trump and Senate Republicans fail to solve US debt ceiling problem

President Donald Trump and key Senate Republicans are still grasping for a solution to the US closing in on the debt ceiling following a White House meeting Thursday. 

The senators, including Majority Leader John Thune and Finance Chairman Mike Crapo, discussed whether to increase the debt ceiling in the tax-and-spending package that Republicans intend to pass this year. Most analysts believe the US will default on a payment obligation sometime this summer without a debt ceiling increase.

“There wasn’t a decision made,” Thune said after the meeting. 

The House has moved to increase the debt ceiling as part of its tax proposal, using a vehicle that will require only Republican votes. But Thune has said he wants to handle the debt ceiling separately, to put Democrats on the record supporting the increase.

During the meeting, Trump reiterated that he favored making tax cuts permanent, Thune said. 

Senator Ron Johnson, a Wisconsin Republican, said a cap on the corporate state and local tax deduction was discussed during the meeting as a way to help pay for the package. No decisions were made on that, however.

The gathering unfolded as the Senate has stalled on Trump’s top legislative priority, a giant package of tax cuts. The House last month passed a budget outline for the bill, which also included cuts to entitlement programs paired with a boost to border security and military spending, but the Senate has yet to act on it. 

At the same time, a showdown between Senate Republicans and Democrats could lead to a government shutdown this weekend. 

Senator Chuck Grassley expressed frustration after the White House meeting. “It was all talk talk talk,” the Iowa Republican said. “Just like the last 10 weeks.”

Thom Tillis of North Carolina said the president told the senators that he wanted the debt ceiling paired with the tax package, which would bypass the Democratic minority. 

“I think we need to tackle it and I think the president agrees with that,” Tillis said. He added that there were 11 Senate Republicans who have never voted for a debt ceiling increase, and spending cuts must be addressed. Specific proposals were discussed with Trump, he said.

House Speaker Mike Johnson has said that he wants Congress to wrap up work on the package by the end of May, while Treasury Secretary Scott Bessent said Thursday he envisions it being completed by the summer. The Senate would have to move quickly in order to meet those goals. 

One of the key holdups is the price tag of the tax cuts. The House bill allows $4.5 trillion in tax reductions over a decade, in exchange for $2 trillion in spending cuts and a $4 trillion increase in the debt ceiling. 

Senate Republicans have said permanently locking in the lower individual rates and expiring business provisions from Trump’s 2017 law — set to expire at the end of this year — is their top legislative priority. The tax cut outline passed by the House last month would only cover an eight or nine-year extension, unless lawmakers can identify more than $2 trillion in spending cuts over a decade.

One way around that would be for the Senate to use a budget gimmick to assume about $4 trillion of the Trump tax cut extension actually costs zero dollars because those tax cuts are already part of the tax code. It’s unclear if this “current policy” workaround would be permissible under Senate rules. 

Crapo said the laundry list of tax cuts that his Republican colleagues want in the bill is ballooning. In addition to renewing the 2017 overhaul, the GOP is mulling ending taxes on tipped wages, overtime pay and estates. He said there are proposals to expand Opportunity Zones capital gains tax breaks and to increase the $2,000 child credit.

“Permanence is our highest priority in the Republican Finance Committee. It’s a battle, but we are making that our No. 1 priority,” Crapo said Wednesday at a US Chamber of Commerce event. 

He said there are more than 200 tax requests before the committee for consideration. And that has to be reconciled with House GOP demands for offsetting spending cuts. 

“That’s a tall order,” Crapo said. 

Republicans are using a two-step budget reconciliation process that will allow them to pass the bill on GOP votes alone, bypassing Democrats. Once the House and Senate agree to a budget outline, they can begin the process of negotiating the details of the legislation. Such a bill can pass the Senate with just 50 votes instead of the usual 60 votes.