Debt ceiling: what is it about?
Later this week we’ll be discussing aspects related to the US debt ceiling, so if you’re unfamiliar with the term, here’s a quick summary.
The debt ceiling is a legal limit on the amount of public debt that the United States government can take on. It’s effectively meant to ensure the government doesn’t spend more than it can afford, but it’s been a source of political controversy in recent years as lawmakers debated whether or not to raise the limit.
The debt ceiling does not limit the amount of money the government can spend, but the amount it can borrow to fund that spending. The United States Congress has the power to raise or lower the debt ceilingand it has been addressed many times in the past.
You could say it’s like a government credit card limit. Just as you have a limit on how much money you can borrow with your credit card, the government also has a limit on how much money they can borrow. Sometimes they increase it because the government needs to borrow more money to pay for things like schools, roads, and the military. It has caused some problems in the past when Congress disagrees – yes, it happens quite often – on whether or not to raise it.
Since the modern debt ceiling was introduced in 1917, Congress has raised the limit more than 100 times. The frequency of increases has varied over time, with some periods going through multiple increases in a single year and others going through several years without change.
We all want to avoid a government standstill or payment defaults.