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the United States Debt Ceiling

1

The United States debt ceiling or debt limit is a legislative limit on the amount of national debt that can be issued by the US Treasury, thus limiting how much money the federal government may borrow.

A debt limit is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on.

The United States Debt Limit Explained - (CR) Heritage ... by YouAsked AZ

2

The debt ceiling is an aggregate figure which applies to the gross debt, which includes debt in the hands of the public and in intra-government accounts.

Debt Limit - What is the Federal Debt Limit? by Conservative Channel

3

Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit government deficits.

4

In effect, it can only restrain the Treasury from paying for expenditures and other financial obligations after the limit has been reached, but which have already been approved and appropriated.

5

When the debt ceiling is actually reached without an increase in the limit having been enacted, Treasury will need to resort to "extraordinary measures" to temporarily finance government expenditures and obligations until a resolution can be reached.

6

The Treasury has never reached the point of exhausting extraordinary measures, resulting in default, although on some occasions, Congress appeared like it would allow a default to take place.

7

If this situation were to occur, it is unclear whether Treasury would be able to prioritize payments on debt to avoid a default on its bond obligations, but it would at least have to default on some of its non-bond payment obligations.

8

A protracted default could trigger a variety of economic problems including a financial crisis, and a decline in output that would put the country into an economic recession.

The term financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value.

In economics, a recession is a business cycle contraction which results in a general slowdown in economic activity.

9

Management of the United States public debt is an important part of the macroeconomics of the United States economy and finance system, and the debt ceiling is a constraint on the executive's ability to manage the U.S. economy.

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole.

10

There is debate, however, on how the U.S. economy should be managed, and whether a debt ceiling is an appropriate mechanism for restraining government spending.

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