The debt ceiling is the total cap on the amount of money the US government is permitted to borrow. It’s not an annual cap, but an absolute cap.
Since 1960, Congress has raised it 78 times. It can only be raised by Congress, not the President.
The last time it was raised was in December 2021 and it was raised to $31.4 trillion.
Some time next year (as early as June 2023 and as late as the fall of 2023), the US will hit the total debt ceiling and need to borrow more money to pay its obligations.
Although the debt ceiling was originally passed to prevent the US from “spending beyond its means,” the debt ceiling does not prevent Congress from passing budgets that require it to borrow and the US government can borrow until it hits that debt ceiling.
When the US hits the debt ceiling it really has no alternative to borrow or it will not be able to meet its obligations. The US is, for example, obligated to pay Social Security benefits, Medicare costs and make payments to defense contractors it has entered into contracts with. When Congress passes its budget it is not dumb enough to not know that it will need to borrow money to pay the bills, as the expenses in the budget are usually known to exceed revenues even when the budget is passed. If the US doesn’t raise the debt ceiling, it would simply default on its obligations.
If the US defaulted on its obligations it would hurt its credit rating, which would only increase its borrowing costs (lenders charge higher interest rates to individuals who are at-risk of not paying their bills). There is also strong evidence that this would generally hurt the economy.
Although it is unlikely that the US would default on its debt, during the Obama administration the Republicans “pushed it to the brink” by threatening to not approve a debt ceiling increase unless Obama agreed to spending cuts. With Republicans likely to take back control of the House, many fear this scenario could repeat.
Adam Cancryn, 11-16, 22, https://www.politico.com/news/2022/11/16/lame-duck-debt-ceiling-deal-00067123, Politico, White House’s hopes for a lame-duck debt ceiling deal are fading fast,
The U.S. has never defaulted on its debt. And the absolute certainty the nation would never fail to honor its outstanding bonds — the so-called “full faith and credit of the U.S.” — underpins global financial markets. U.S. Treasury bonds are considered among the safest investments on earth and usually a haven for investors during uncertain times.
Debt limit fights were a hallmark of the second half of President Barack Obama’s first term, when Republicans controlled Capitol Hill. The worst occurred in the summer of 2011, when credit rating agency Standard & Poor’s stripped the U.S. of its perfect AAA bond rating status, the first such downgrade in American history. The fight led to the most volatile week on Wall Street since the 2008 financial crisis. Obama subsequently refused to negotiate around the debt limit at all. Memories of those bitter battles have led progressive Democrats to push for a measure in the lame duck that either raises the debt limit by a massive amount or eliminates it altogether.
In order to avoid this Republican conditioning and going back to the brink (or over the edge), many Democrats have proposed raising the debt ceiling in the Lame Duck session of Congress, which is the Congressional session that occurs after the elections but before the new Congress is sworn in in January. Senator Elizabeth Warren has even proposed eliminating the ceiling all together to the government to borrow without this restraint.
Background
Q&A: Everything You Should Know About the Debt Ceiling
This weekend there are two related questions you may be called to speak about.
Should Congress raise the debt ceiling in the lame duck?
Should Congress eliminate the debt ceiling in the lame duck?
Yes – Raise
*US default would result in increased borrowing costs because of rising interest rates
*US default would destroy the US economy
Yes – Raise Permanently
*Bad to constantly threaten the full faith and credit of the US
*Bad to play politics with the debt..
White House hopes for a lame duck debt ceiling deal are fading fast
No – Don’t Raise
*There should be negotiations to limit spending in exchange for increasing the debt ceiling
Republicans must fight Biden’s Trillion Dollar Spending by Refusing to Give in on the Debt Ceiling
The federal statutory debt ceiling makes for good policy. Congressional Democrats who want to repeal it to give themselves a permanent blank check to spend American taxpayer dollars are equal parts smug elites and constitutional vandals.
Congressional Republicans should absolutely fight to defend the statutory debt limit this year and leverage it next year to extract badly needed spending reforms from President Joe Biden and his party…,
Contrary to the phony narrative coming soon to an editorial page near you, the debt ceiling is not a formality. It is not an anachronism or a symbol. It is an indispensable tool, specifically designed to protect taxpayers and check the ambitions of entitled politicians. The contempt elites in both parties have for the debt ceiling is compelling evidence for its value.
No – Don’t Raise Permanently
*We need some restraints on US deficit spending