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Debt Ceiling Debate

| May 25, 2023

What You Should Know About the Debt Ceiling Debate

On Monday, May 22, President Joe Biden and House Speaker Kevin McCarthy met at the White House to discuss raising the statutory limit on U.S. government debt, generally called the debt ceiling. Although both leaders termed the discussion "productive," there was no resolution, and their respective negotiating teams continued discussions.1 Here are some answers to questions you may have about the issues behind the current impasse.

What is the debt ceiling?

The debt ceiling is a statutory limit on cumulative U.S. government debt, which is the sum of annual deficits since 1835 — the only time the U.S. government had no debt — plus interest owed to investors who purchased Treasury securities issued to finance the debt.2 It limits the amount that
the government can borrow to meet financial obligations already authorized by Congress. It does not authorize future spending. However, in recent years, raising the debt ceiling has been used as leverage to negotiate on the federal budget.

Why do we have a debt ceiling?

A debt ceiling was first introduced in 1917 to make it easier for the federal government to borrow during World War I. Before that time, all borrowing had to be authorized by Congress in very specific terms, which made it difficult to respond to changing needs. The modern debt ceiling, which aggregates almost all federal debt under one limit, was established in 1939 and has generally been used as a flexible structure to encourage fiscal responsibility.3 Since 1960, the ceiling has been raised, modified, or suspended 78 times, mostly with little fanfare until a political battle in 2011.4 

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