What’s at Stake if the Debt Ceiling Isn’t Raised There’s typically a shared acceptance that lifting the limit is essential to keeping the economy in good working order.īut it’s not always a tidy process. Raising the debt limit is usually not a partisan issue that only Democrats or only Republicans support. got marked as less trustworthy to lend to. However, in 2011, the threat of default led to S&P Global Ratings (formerly Standard and Poor’s) downgrading the country’s credit rating. Whenever the country has approached the debt limit ( 17 times since 2001), Congress has voted to raise or suspend the debt ceiling. Yellen wrote, “Even if the Biden administration hadn’t authorized any spending, we would still need to address the debt ceiling now.” Hitting the Debt Ceiling-A Problem That Happens a Lot Some Republicans tied their opposition to raising the debt ceiling to their concerns about the Biden administration’s spending plans, but the current debt situation is in large part due to spending during the Trump administration, including massive tax cuts enacted in 2017. Read more: Missing Your September Child Tax Credit Payment? Here Are 3 Things You Should Know Millions of families who rely on the monthly child tax credit could see delays.” Nearly 50 million seniors could stop receiving Social Security checks for a time. default on its debt: “We could see indefinite delays in critical payments. Yellen spelled out the worst-case scenario should the U.S. The bill that passed on TKTK filled the coffers with an additional $480 billion, but the Treasury Department warned that cash would run out around Dec. The Treasury Department was slated to run out of cash in mid-October. When Was the Last Time the Debt Ceiling Was Raised?Ĭongress voted in 2019 to suspend the debt limit for two years and take on more debt-like the current situation, the country was approaching the debt limit cap. The federal government is more than $28 trillion in debt. The national debt is money that gets borrowed to cover deficits, a running tab of what the country owes lenders. The deficit is what happens when the government spends more money in a fiscal year than it brings in through taxes and other revenue. The deficit is different from the national debt. It can be even more confusing because another term you might hear a lot right now is the deficit. Read more: Janet Yellen Is Sounding The Alarm On The Debt Ceiling.
“Instead, when we raise the debt ceiling, we’re effectively agreeing to raise the country’s credit card balance.” “Raising the debt ceiling doesn’t authorize additional spending of taxpayer dollars,” Treasury Secretary Janet Yellen wrote in a Wall Street Journal op-ed last month. But while they’re connected, they’re two distinct challenges for lawmakers. A default could also cause turmoil in the stock market, which could affect the value of any investments you have.ĭiscussion about the debt ceiling can be confusing because government spending-the budget-is often discussed simultaneously. This could mean delays for payments you’re expecting from the government, and it could impact how expensive it is to buy items on credit, the Treasury secretary has warned. If the country doesn’t increase its debt limit, it’s like maxing out a credit card: The bill-paying activity stops, and the government defaults on the financial commitments it has made.
The country also has to pay interest on debt it has already taken out to pay older bills. Those bills include items like Social Security payments, military and federal employee salaries, and tax refunds. The debt ceiling, or the debt limit, is the amount of money the United States federal government is allowed to borrow in order to pay its bills. Here’s what you should know about the current debate about raising the debt limit. If you think it might turn into a long and arduous final month of the year for lawmakers-and Americans who could ultimately be affected by their decisions-you’re probably right.īut although the idea of the debt ceiling may feel distant from the lives of ordinary Americans, how it’s handled in the coming months could have an impact that cascades into your own financial situation. Raising the debt ceiling allows the government to borrow money to cover its existing financial obligations-but unfortunately, this is only temporary.Ĭongress has also only extended government funding for the new fiscal year until early December. The House of Representatives voted today to raise the debt ceiling, following the lead of a Senate vote last week. Just like you and me, the federal government can run out of money if it doesn’t plan ahead-and like for us, it can lead to dire consequences.
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