Election Day has arrived, and American voters are set to determine whether former President Trump or Vice President Harris will win the presidency, with the victor set to face a host of fiscal policy challenges to address when they take office next year.
The winner of the presidential election along with either Democratic or Republican majorities in the House and Senate will be confronted with a debate over the national debt, budget caps on federal spending as well as expiring tax cuts that will keep fiscal policy in focus throughout 2025.
The first fiscal policy issue that will flare up will be the debt limit, which Congress suspended from the spring of 2023 until Jan. 1, 2025. That maneuver means the federal government can incur debt without facing a cap until the suspension ends in early January.
Once the debt limit is reactivated, the Treasury Department will have to begin using its "extraordinary measures" to fund the government's obligations and avoid a default on the debt. It's uncertain how long those extraordinary measures will last, though they typically provide a buffer of several months before they elapse – which is ultimately the deadline for Congress to raise or re-suspend the debt limit.
During the last debt limit standoff, extraordinary measures began on Jan. 19 and the nonpartisan Congressional Budget Office signaled a few months later that they would be exhausted in early June, at which time the Treasury Department would have been unable to satisfy the federal government's obligations.
The next president and congressional leadership in both the House and Senate will also be tasked with negotiating whether the budget caps on discretionary spending – which is essentially all federal spending except Social Security, Medicare and interest payments on the debt – should be extended or reformed.