Understand the US debt ceiling

The debt ceiling, also known as the statutory debt limit, is the maximum amount of debt that the United States government is authorized to borrow. The debt ceiling is set by Congress and is separate from the budget process. The government can only borrow money up to the limit set by the debt ceiling.

When the government reaches the debt ceiling, it can no longer borrow money and must either raise the debt ceiling or take other actions to reduce its spending. This can include cutting government programs, reducing spending on entitlements, or increasing taxes.

In recent years, the debt ceiling has become a contentious issue in the United States. In 2011, a dispute over raising the debt ceiling led to a downgrade of the US credit rating and a stock market sell-off. In 2013, another debate over raising the debt ceiling led to a government shutdown.

In 2017, the U.S. Congress suspended the debt ceiling until 2021. That means, until that date, the government has the authority to borrow as much as needed to fund its operations, without a need to raise the debt ceiling.

When the debt ceiling is reached, the U.S. Treasury can use "extraordinary measures" to continue borrowing for a limited period of time. These measures include suspending investments in certain government retirement funds and delaying the issuance of new debt to state and local governments.

However, if the debt ceiling is not raised or the government does not take other actions to reduce spending, the government would be unable to pay its bills, which could lead to a default on its debt obligations and have significant economic consequences.

The debt ceiling is a complex and controversial issue with important implications for the U.S. economy and government finances. It is important for policymakers to consider the long-term implications of raising the debt ceiling and take steps to address the underlying drivers of the national debt.

In conclusion, the debt ceiling is a limit set by the Congress on the amount of debt the US government can borrow. When the government reaches the debt ceiling, it must either raise the limit or take other actions to reduce spending. The issue of raising the debt ceiling has been a contentious one in recent years, as some argue it allows the government to spend recklessly, while others argue it is necessary to fund important programs and services. The debt ceiling has significant economic consequences, and policymakers must consider the long-term implications of raising it and address the underlying drivers of the national debt.