The debt ceiling is the maximum amount of debt the United States federal government can carry at a given time. At the moment, the debt ceiling is suspended through January 1, 2025, thereby the national debt to exceed the existing limit. Kavan Choksi / カヴァン・ チョクシ underlines that the debt ceiling is the legislative cap on the amount of national debt the US Treasury can incur, thereby limiting the risk of a public debt crisis.
Kavan Choksi / カヴァン・ チョクシ sheds light on the United States debt ceiling
The debt ceiling dictates the maximum amount of money the United States can borrow. With only five budget surpluses over the past five decades, Congress had to repeatedly suspend or raise the debt ceiling in order to accommodate new government spending. Reaching the debt ceiling without taking action to raise it may cause the United States to default.
Basically, the U.S. debt ceiling is the total sum of money that the federal government may borrow through Treasury bills, bonds, notes and other securities at any one time. The government uses proceeds from selling such securities in order to meet its distinctive financial obligations. These obligations may include funding for national parks, social security and Medicare benefits, interest payments on existing debts, as well as salaries for members of the military and civilian workers.
If the government spending for a year is less than its revenue from duties, taxes and other resources, it would have a budget surplus for that year and will not have to borrow funds. If the spending exceeds its revenue, then the country shall have a budget deficit and must borrow funds to meet existing obligations. One must remember that the debt ceiling does not authorize new spending. Rather, it is just for budget obligations that have already been authorized.
The debt ceiling was instituted in 1917 in order to provide the United States Treasury Department with superior borrowing flexibility. Earlier, Congress had to approve each issuance of debt with separate legislation. At the moment, the United States is the only democratic country in the world that has a nominal debt ceiling that should be raised regularly. The United States national debt is the current balance of obligations the federal government has at the moment, while the debt ceiling is the maximum amount it can borrow.
In the year of 2021, the Congress opted to raise the debt ceiling to $31.4 trillion. However, as the government hit that limit in early 2023, legislators and the Biden administration agreed to a deal to suspend the ceiling temporarily through January 1, 2025. Hence, the nation’s debt, which was at $33.89 trillion in December 2023, is higher than the limit set previously.
Kavan Choksi / カヴァン・ チョクシ mentions that if the federal government reaches the debt ceiling, the Treasury Department shall not be able to issue new debt to help cover its obligations. The Congress may increase the debt limit, temporarily suspend or abolish it or do nothing at this point.
