What is the debt ceiling? What does it mean and why do politicians want to raise it?

Published: Sep. 23, 2021

Is the U.S. poised to default on its loans for the first time?

It is a possibility as a deadline to raise the debt ceiling is next month and congressional Republicans say they will not provide the votes to help raise it.

Here is a breakdown of what the debt ceiling is, why it is being discussed and why so many politicians want to raise it.

What is the debt ceiling?

The debt ceiling is a restriction or limit Congress places on the federal government in relation to how much national debt the U.S. Treasury can incur.

If the amount of government debt hits that limit and Congress does not raise the debt ceiling, the federal government would be unable to pay what it owes and could default on its loans.

When Congress raises or suspends the debt ceiling, it is not giving the green light for new spending. Instead, it is allowing the Treasury to pay for pre-approved spending.

Why do we have a debt ceiling? When did the debt ceiling start?

The U.S. has had a debt ceiling in place for more than 100 years. It began in 1917 with the passing of the Second Liberty Bond Act and was initially set at $11.5 billion, according to CBS News.

Before that, lawmakers had to approve debts separately. CBS News reported that different debts were later combined under one debt limit in 1939, and it was set at $45 billion.

Since 1939, the national debt ceiling has been raised or suspended hundreds of times, according to the Committee for a Responsible Federal Budget.

How many times was the debt ceiling raised under former President Donald Trump?

Under former President Donald Trump, the debt ceiling was suspended three times, according to FactCheck.org: in 2017, 2018 and 2019.

After each of those times, Congress voted to raise the debt ceiling at the end of the period of suspension to cover for any borrowing that took place during those time periods.

What happens if politicians in Congress do not raise the debt ceiling?

The Treasury takes “extraordinary measures” such as suspending investments or sales of securities, according to CBS News.

When those options are exhausted, the Treasury spends whatever cash it has. When the cash runs out, which experts say the cash could run out by October, the federal government would not be able to pay its bills and would have to default on its loans.

However, this has never happened in U.S. history.

But in the scenario that the government does default on its loans, millions of Americans would be affected and the government would shut down.

Among those who would be affected:

  • Federal workers, federal civilian employees and members of the U.S. armed forces would not get paid
  • Veterans’ compensation and pensions would not get paid out.
  • Social Security payments would be missed
  • Millions of Americans who receive food assistance through the Supplemental Nutrition Assistance Program (SNAP) would see their benefits grind to a halt.

The Washington Post notes that the U.S. could also plunge into a recession.

How are Democrats and Republicans split on the issue right now?

On Tuesday, the House passed a bill to avoid a government shutdown and suspend the debt ceiling. So now, the issue to keep the government funded falls to the Senate.

Senate Democrat leaders in Congress announced they are including a debt ceiling suspension as a stopgap measure to fund the government through December of this year, according to CBS News. Under this legislation, the debt limit would be suspended until December of next year, which would be after the midterm elections.

But this measure proves risky for both parties in government. If the Democrats’ bill fails, the country is more likely to be headed toward a government shutdown. And Republicans who vote against legislation that ties together raising or suspending the debt ceiling with money are also seen as voting in favor of a government shutdown.

With the Senate split 50-50, Democrats need 10 Republicans to support legislation that raises the debt ceiling. Republican Sen. Mitch McConnell remains staunch in his position that no one in his caucus will support the legislation, according to The Washington Post.

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published this page in News and Politics 2021-09-24 03:32:41 -0700