[BUG] [BUG] Claude Code VS Code Extension v2.1.161 Forces 1M Context on Pro Plan Without Request — Blocks All Usage on macOS

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Claude Code automatically selects the 1M context window without user request and immediately throws the usage credits error, completely blocking all work. This happens on every new session regardless of:

Session usage being at 0%
Daily usage being at only 36% or 42% of plan limit
No prior conversation history loaded
No large files open

What Should Happen?

Claude Code should use the standard context window by default on a fresh Pro plan session. The Pro plan should not require usage credits for standard context. I never requested 1M context at any point.

Error Messages/Logs

API Error: Usage credits required for 1M context · turn on usage credits at claude.ai/settings/usage, or use --model to switch to standard context

Steps to Reproduce

Subscribe to Claude Pro plan ($20/month) — confirm active subscription with daily usage at 42% (well within plan limits)
Install Claude Code extension in Visual Studio Code on macOS
Open an existing Next.js project folder in VS Code (in my case: ITSA WHITE LABEL PLATFORM — a multi-tenant SaaS platform)
Open the Claude Code panel in VS Code (set to panel location via claudeCode.preferredLocation: "panel" in settings.json)
Attempt to send any prompt to Claude Code — including simple single-line prompts on a fresh session with 0% of the 5-hour rolling window used
Observe the error immediately before any response is generated

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.126

Claude Code Version

2.1.161

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

Claude Code should use the standard context window by default on a fresh Pro plan session. The Pro plan should not require usage credits for standard context. I never requested 1M context at any point.