Following the passage of a new House rules package on Monday and with Donald Trump urging House Republicans to “play tough” on raising the federal debt limit, Democrats are warning of a chaotic 118th Congress that could see the government cease to function normally.

The rules package passed the House under the Republican party’s slim majority by a 220-213 vote. A single Republican, Representative Tony Gonzales of Texas, voted against the package, as did all Democrats.

The new rules contain a slew of concessions to the far right of the Republican party, including a measure to force a vote on confidence in the speaker by a single representative, and gutting the office of congressional ethics, the body that carries out bipartisan inquiries into allegations of misconduct by members of Congress.

“Kevin McCarthy hasn’t held the speaker’s gavel for a whole week, and already he’s handed over the keys to Maga extremists and special interests for the next two years,” said the House Democratic whip, Katherine Clark, in a statement on Monday.

The rules package also sets up a showdown over the federal debt limit. It removes the so-called Gephardt rule, which allowed the House to circumvent a vote on lifting the debt ceiling, which had remained in place while Democrats controlled the House.

Republicans have made clear that they plan to leverage consideration of further debt increases in order to secure significant government spending cuts – potentially including to social security and Medicare. The move opens the possibility of a government shutdown similar to the one in 2013, or even a federal debt default. Both would have severe consequences for the US and global economy.

On Monday, Trump, whose influence over the party was shaken somewhat by poor midterm election results for his endorsed candidates but who remains the frontrunner for the 2024 Republican nomination for president, called on House Republicans to leverage power “by simply playing tough in the upcoming debt ceiling negotiations”.

Posting on the social media network he set up, Truth Social, Trump pressed all wings of the Republican party, including those rebels who initially voted against McCarthy, to join the negotiations: “It will be a beautiful and joyous thing for the people of our country to watch.”

On Tuesday, senior House Republicans were already offering warning signs of disruptive negotiations ahead. The majority leader, Steve Scalise, was asked by reporters if he could guarantee US would avoid a debt limit breach. He argued of the need for “living within our means” by suggesting the US was “about to max out the credit card”.

Forecasters predict that the current debt ceiling of almost $31.4tn will need to be raised some time around August this year.

But the chaos last week, which saw 15 floor votes before McCarthy won the speakership, underlined the bitter divisions within the House Republican party and empowered a smaller group of ultra-conservative lawmakers belonging to the Freedom Caucus. The result means that negotiations on the debt ceiling are likely to be extremely fraught, as the speaker will need to continue to appease the extreme Republican fringe that demands deep spending cuts.

The situation is likely to bear the hallmarks of the 2011 debt ceiling crisis, in which the Republican-controlled House demanded spending cuts from the Obama administration, resulting in market volatility and the downgrading of the US government’s credit rating for the first time in history.