Reconciliation, Debt Limit Update
April 1, 2025
Republican congressional leaders are looking to align their reconciliation instructions this week to move forward on tax and other priorities. President Donald Trump reiterated his preference for a single bill that raises the debt ceiling.
Why it matters: The U.S. is expected to hit the debt limit this summer (more below). Reconciliation will allow the GOP to raise the debt limit without Democratic votes.
By the numbers: The $36.1 trillion debt limit came back into force on January 1, 2025, and the Treasury has since used extraordinary measures to pay its bills. The “x date” at which the U.S. government will run out of money is a moving target that is determined by tax revenues.
- The Congressional Budget Office (CBO) published a report last week anticipating the “X date” will occur in August or September 2025.
- The report notes the exact timing is still unclear and could come as early as May or June: “The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from CBO’s projections.”
- Tax collections will ramp up after April 15, but note that Los Angeles County—the nation's most populous—has an extended deadline of October 15 due to the wildfire disaster.
- The House reconciliation plan would raise the debt ceiling by $4 trillion. Suspending the debt limit—as has been done in the past—cannot be accomplished through reconciliation.
What they’re saying: Senate Republicans have not been keen on raising the debt ceiling via reconciliation, but Trump has doubled down on his insistence.
- Deficit hawks including Senators Ron Johnson (R-WI), Mike Lee (R-UT), Rand Paul (R-KY), and Rick Scott (R-FL) have called for more spending cuts with any debt ceiling hike.
- On the other end of the GOP spectrum, concerns over potential Medicaid cuts may temper moderates and senators from states heavily reliant on the program (e.g., West Virginia).
- Majority Leader John Thune (R-SD) is likely to include a debt ceiling provision in the reconciliation bill expected to come before the Senate, but Democrats are not expected to vote for any reconciliation legislation.
- Recall that the May 2023 debt ceiling deal between President Joe Biden and Speaker Kevin McCarthy led to McCarthy’s ouster.
The big picture: Trump’s support for raising the debt ceiling is pivotal, as he has helped corral the House GOP’s narrow majority on key votes.
- Senators are notoriously more independent from party leadership, but the Administration’s success in approving nominees may bolster confidence heading into the reconciliation process.
- However, balancing the demands of deficit hawks with the concerns of moderates will prove challenging.
The bottom line: Trump does not want to negotiate the debt ceiling with Democrats, which would likely involve policy and spending concessions. Lawmakers will attempt to move forward over the next several weeks, but we expect the Treasury to revise its “X date” estimate as tax receipts begin to materialize.