Donald Trump issues major depression warning

Donald Trump has suggested the US could be facing a “depression” as he attacked a debt ceiling deal agreed to by former House Speaker Kevin McCarthy.

The president-elect, who failed to get a provision raising the debt ceiling included in a bill passed by lawmakers earlier this month, claimed on social media Sunday that Democrats would “prefer ‘depression’ as long as it hurts the Republican Party.”

Trump urged lawmakers to address the issue while President Joe Biden is still in office.

Newsweek has reached out to the White House and a Trump spokesman by email for comment.

Why it matters

Congress suspended the debt ceiling until Jan. 1, 2025 under the 2023 deal, but lawmakers will have to act in 2025 — likely after Trump is back in office — to raise the debt limit again to prevent the U.S. from defaulting on its obligations.

Lawmakers have always managed to raise the debt ceiling in time because otherwise the government would default on its obligations — which economists broadly agree would have serious economic consequences.

Economists have previously warned that even a near-default could trigger a recession.

What to know

After weeks of negotiations in the summer of 2023, lawmakers passed the Fiscal Responsibility Act, which suspended the nation’s debt limit until January 1, 2025.

The debt ceiling, or debt limit, is the total amount the US government can borrow to meet its existing legal obligations. The national debt is currently about $36 trillion, according to the Treasury Department.

After Jan. 1, the Treasury Department can use what it calls “extraordinary measures” to ensure the United States does not default on its debt.

In a letter to congressional leaders on Friday, Treasury Secretary Janet Yellen said her agency may have to begin taking “extraordinary measures” as early as Jan. 14 to prevent the United States from defaulting on its debt.

She urged lawmakers to “act to protect the full faith and credit of the United States.”

Some economists have estimated that these moves could push the deadline to raise the debt ceiling to June 2025 — something Trump wants to avoid since that will be when he is president and could influence his agenda.

He had demanded that a provision raising or suspending the debt ceiling be included in legislation passed earlier in December to avert a government shutdown. Republican lawmakers complied, but the bill failed to pass in a House vote.

Biden ultimately signed a bill on December 21 that funds the government at current levels through March 24 without a debt ceiling provision.

What people say

Trump wrote Sunday on Truth Social: “The extension of the debt ceiling by a former Speaker of the House, a good man and a friend of mine, from last September by the Biden administration to June by the Trump administration, will go down as one of the dumbest political decisions done for years. There was no reason to do it – NOTHING WAS GAINED and we got nothing for it – A major reason the presidency was lost.”

Referring to the year the Great Depression began, Trump continued: “It was Biden’s problem, not ours. Now it’s going to be ours. I call it ‘1929’ because the Democrats don’t care what our country might be forced into.” In fact, they would prefer “depression” as long as it hurt the Republican Party.

“Democrats must be forced to take a vote on this treasonous issue NOW, under the Biden administration, and not in June. They should be blamed for this potential disaster, not the Republicans!”

That’s what Trump and incoming Vice President JD Vance said in a recent statement: “Raising the debt ceiling isn’t great, but we’d rather do it on Biden’s watch. If the Democrats won’t cooperate on the debt ceiling now, what makes anyone think they would in June under our administration? Let’s have this debate now.”

Yellen in her letter to congressional leaders: “Treasury currently expects to reach the new limit between January 14 and January 23, at which point it will be necessary for the Treasury Department to begin taking extraordinary measures. I respectfully urge Congress to act to protect the full faith and credit of the United States .”

Biden said in a statement on Dec. 21 that the stopgap spending bill “represents a compromise, meaning neither side got everything they wanted. But it rejects the fast track to a tax cut for billionaires that Republicans sought, and the ensures that the government can continue to operate at full capacity.”

What’s next

Republicans will control both houses of Congress starting Jan. 3, but it is not clear whether they will vote on the debt ceiling before Trump takes office on Jan. 20.

If the Treasury Department begins implementing emergency measures in mid-January, it will be able to meet its obligations for several months before Congress has to address the issue.

Update 12/30/24, 10:54 a.m. ET: This article was updated to reflect that Newsweek has reached out to the White House for comment.