The Debt Ceiling – My favorite client FAQs
There’s a lot of talk about the Debt Ceiling. What is the Debt Ceiling and should we be scared that the US is coming up quickly on our debt ceiling?
- What is the debt ceiling? The debt limit, also known as the debt ceiling, is the total amount of money that the U.S. government is authorized to borrow to meet existing obligations. These include Social Security and Medicare benefits, military salaries and veterans’ benefits, debt interest, and tax refunds.
- Why does the debt ceiling exist? It is stated in the U.S. Constitution that Congress must authorize borrowing. The debt limit was first instituted in the early 20th century to keep the Treasury from having to ask permission each time it issued debt.
- How close are we to hitting the ceiling? The current debt limit of $31.4 trillion, set in December 2021, was passed in early 2023. At that point, the U.S. government was not able to issue any debt and has been relying on emergency funds to meet short-term obligations.
- When will emergency funding run out? It could be as early as June or sometime in August, according to Congressional budget forecasts.
- How often has the debt ceiling been raised? Congress has acted 78 times to “permanently raise, temporarily extend or revise the definition of the debt limit” since 1960, according to the Treasury Department. It has been raised 49 times under Republican presidents and 29 times under Democratic presidents, by Congressional leaders in both parties.
- Has Congress ever failed to increase the debt limit? Despite many heated standoffs, Congress has always acted when called upon to raise the debt ceiling to meet the obligations of the U.S. government.
- What are the potential stakes of not raising the debt ceiling? Not increasing the debt limit could mean the federal government has to default — even temporarily — on its obligations. Bond holders are paid first, while salaries for government employees are more likely to be delayed.
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