The debt ceiling is a limit set by Congress on the total outstanding amount of money the United States Treasury (within the Executive Branch) is allowed to borrow on behalf of the federal government at any given time. This is a limited authority that has been delegated to the Treasury by Congress, since the Constitution states that only the legislative branch has the “power of the purse.” The debt ceiling is currently about $31.4 trillion and was raised by $2.5 trillion last year, but estimates forecast it will need to be lifted again as early as the second half of 2023 in order for the U.S. to meet its financial obligations.
The debt ceiling does not, however, constrain the amount the federal government actually spends or the amount it needs to borrow to honor financial commitments. Congress determines spending and taxation levels through government funding bills – Appropriations, Continuing Resolutions, and Reconciliation bills.
What happens if Congress fails to lift the debt ceiling?
If Congress commits to spending levels that extend beyond the Treasury’s debt ceiling limit, Congress can either lift, suspend, or eliminate the debt ceiling before the Treasury meets the borrowing limit. If Congress fails to address the limit, the U.S. will default on its financial obligations. This could mean failing to make payments for critical programs, like Medicare, Medicaid, Social Security, or veterans benefits, and other responsibilities like U.S. Treasury Bonds. Even the threat of default is harmful enough to impact global financial markets and increase government borrowing costs, like interest rates.
Has the debt ceiling been lifted before?
YES! The U.S. has never defaulted on its debt before (knock on wood). That’s because both Democrats and Republicans, and even powerful interests like Wall Street (gross, we know), understand the very real and harmful consequences that could result from the U.S. failing to meet its financial responsibilities.
Historically, raising the debt ceiling has been accomplished mostly through “regular order,” meaning by passing legislation that clears 60 votes in the Senate. This pathway has allowed Republicans to time and time again hold the debt limit hostage, refusing to raise the debt ceiling unless Democratic leadership agreed to spending cuts to necessary programs like Social Security and Medicare. Here are a few examples: