The debt ceiling is “the legal limit on the total amount of federal debt the government can accrue” (CRFB). In December 2021, the debt ceiling was raised to $31.4 trillion, which was maxed out on January 19, 2023. The government uses a mixture of revenue generated from taxes, other forms of revenue and debt to pay for things varying from federal employees to maintaining the military to providing its citizens services. So, why does the debt ceiling matter? Just like if you have too much debt, you will not get a credit card or a loan, countries and governments need to balance the amount of their debt to their revenues or size of their economy.
If there is no change in the debt ceiling, the US government will not be able to borrow beyond the summer. This means that bond holders and creditors cannot be repaid, and there won’t be cash to pay for the “military, or the millions of other federal employees and pensioners, or the beneficiaries of Social Security, Medicare, Medicaid and other entitlement programs” (NPR). The Department of Treasury is now resorting to temporarily resolving this issue by moving around government assets to provide cash.
In 1940, the debt ceiling was first created at $49 billion, and since 1960, has been raised a total of 78 times (which includes both permanent and temporary changes). A poll by PBS showed that most Americans believe that both parties are at fault for the circumstances we have come to with the debt ceiling.
The limit is not typically changed except under dire circumstances, in order to prevent “irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability” (AS). Political editor Ron Elving believes that before starting new expensive endeavors, the government should own “up to the past, paying the bill that has arrived for previous purchases and commitments” (NPR).
While the U.S. government has faced similar circumstances where the debt ceiling has been hit, this situation is different because some Republican Congressional leaders refuse to “raise the limit until the White House and Democrats agree to negotiate deep cuts in the federal budget and substantial changes to the spending process” (NPR).The debt ceiling is not meant for new spending endeavors, but rather to fulfill any “legal obligations that the Congress and presidents of both parties have made in the past” (Department of Treasury). But, once the debt ceiling limit has been passed, the U.S. government will no longer be able to pay for any of the promises they have made in the past. While raising the limit is an option, we will most likely see this situation in the near future, so rather than the government promising to pay back more money, it would be prudent for the U.S. to pay more attention to its budget. Our elected officials should work together to reduce the budget deficit by exploring avenues to prudently reduce expenses, along with ways to grow the economy and increase tax revenue.