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The next president will face a budget battle over debt, deficits and taxes in 2025

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election day has arrived, and American voters will decide whether former President Trump or Vice President Harris wins the presidency, with the winner facing a host of fiscal challenges when he takes office next year.

The winner of the presidential election and the Democratic or Republican majority in the House and Senate will face a debate over the national debt and budget limits Federal spending and expiring tax cuts that will keep fiscal policy in focus throughout 2025.

The first fiscal policy issue to flare up will be the debt ceiling, which Congress suspended from spring 2023 to January 1, 2025. This maneuver means the federal government can borrow without facing a cap until the suspension ends in early January.

Once the debt limit is reactivated, the Treasury must begin taking its “extraordinary measures” to finance the government’s obligations and prevent a default. It is uncertain how long these extraordinary measures will last, although they typically provide a buffer of several months before they expire – which is ultimately the deadline for Congress to raise or suspend the debt limit.

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Numerous fiscal policy deadlines await the winner of the presidential election, regardless of whether former President Trump or Vice President Harris emerges victorious. (Ian Maule/Sean Rayford for Getty Images / Getty Images)

During the last one Debt limit The standoff began with extraordinary measures on January 19, and the nonpartisan Congressional Budget Office announced a few months later that they would be exhausted by early June because the Treasury Department would have been unable to meet federal government obligations at that point.

The next president and congressional leadership in both House of Representatives and Senate will also be tasked with negotiating whether budget caps on discretionary spending — essentially all federal spending except Social Security, Medicare and interest payments on the debt — should be extended or reformed.

The Fiscal Responsibility Act of 2023The law, which took effect in May of this year and also suspended the debt ceiling, limited the growth of federal spending on defense and non-defense discretionary items. However, this one The spending caps expire at the end of the 2025 fiscal year at the end of September, meaning the debate over the debt limit could overlap with the discussion over spending levels in the spring.

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Another element of fiscal policy that will be at the center of debate in 2025 is the expiration of tax cuts and provisions in 2025 Tax Cuts and Jobs Act (TCJA) – the 2017 tax law that Trump and congressional Republicans enacted as part of the budget reconciliation process. Due to budget rules governing the impact of reconciliation laws on long-term deficits, certain policies are issued for a limited period of time for compliance purposes.

Key provisions of the tax law set to expire at the end of 2025 include the revised tax brackets, which have been lowered at certain income levels, and the standard deduction, which has increased from $6,500 to $12,000 and from $13,000 to $12,000 for individual taxpayers $24,000 was nearly doubled for married couples filing joint tax returns.

The TCJA also doubled the child tax credit while capping the state and local tax (SALT) deduction at $10,000 – both of which will also expire at the end of 2025.

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The costs of these measures in terms of lost tax revenues and the impact of their possible extension or revision American householdsBusinesses and the economy as a whole are also poised to enter the broader debate over federal spending and debt levels that will take place next year.

Because of these dynamics, budget experts are urging policymakers to seize the opportunity to put the U.S.'s long-term financial health at the center of the debate.

“We are on track to borrow a staggering $2 trillion next year,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget (CRFB), told FOX Business. “Nevertheless, there is a very real danger that lawmakers will borrow even more.”

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“As they grapple with the debt ceiling, expiring tax cuts, FRA caps and the temptation to increase spending, they should remember that every new dollar we borrow hurts the economy, weakens our national security and our children “The fiscal policy decisions of 2025 will have consequences for years to come,” MacGuineas added.

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