2025 US Debt Ceiling Showdown: The Road to a Deal - Four Scenarios

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Navigating Washington: Insights for Business

2025 US Debt Ceiling Showdown: The Road to a Deal - Four Scenarios

09 January 2025 / Report

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This report, Part 1 of 4, examines three viable paths to a deal using a legislative tactic called reconciliation and a fourth unlikely path, all of which contain many twists, turns, and pitfalls that may delay resolution.

Part 2: The Cost of Congressional Indecision: Stress, Disruption, and Inflation
Part 3: Default Is Not an Option
Part 4: The Price of a Deal

Key Insights

The red sweep (i.e., GOP control over both houses of Congress and the White House) does not guarantee smooth sailing for key pieces of legislation in 2025, including for the debt limit.
If Congress and the president do not agree on a path for the debt ceiling before the US Treasury runs out of cash to operate the federal government, then the US will experience a sovereign debt default.
As default is not an option, given the devasting economic and financial market effects, Republicans are likely to use reconciliation to address multiple unavoidable fiscal priorities this year.
A debt ceiling decision could be paired with a deal to fund the federal government before May to avoid automatic spending cuts or an agreement to prevent trillions of dollars in tax hikes at the start of 2026 or one massive bill. All options likely require reconciliation.
If reconciliation is not used to address the debt ceiling, then potentially a more difficult path of passing a “clean” bill (i.e., no strings attached) will be explored.

Authors

Dana M. Peterson

Dana M. Peterson

Chief Economist
The Conference Board

David K. Young

President
The CEO Center, The Conference Board

John Gardner

Head of Public Policy & Research
The CEO Center, The Conference Board

Luis Bourgeois

Researcher and Writer, Fiscal Policy
The CEO Center, The Conference Board

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