United States debt ceiling

This article is part of a series on the
Budget and debt in the United States of America
Major dimensions Economy Expenditures Federal budget Financial position Military budget Public debt Taxation Unemployment Gov't spending
Programs Medicare Social programs Social Security
Contemporary issues Bowles–Simpson Commission Bush tax cuts Debt ceiling history Deficit reduction Fiscal cliff Healthcare reform Political debates Social Security debate "Starve the beast" Subprime mortgage crisis 2007–2008 financial crisis Debt-ceiling crises 2011 2013 2023 2013 budget sequestration Government shutdowns 1980 1981, 1984, 1986 1990 1995–1996 2013 Jan 2018 2018–2019 Related events 2023 Removal of Kevin McCarthy
Terminology Cumulative deficit + Interest ≈ Debt Balance of payments Inflation Continuing resolution
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In the United States, the debt ceiling or debt limit is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury, thus limiting how much money the federal government may pay by borrowing more money, on the debt it already borrowed. The debt ceiling is an aggregate figure that applies to gross debt, which includes debt in the hands of the public and intra-government accounts. About 0.5 percent of the debt is not covered by the ceiling (as of 10/2013).^[1] Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit government deficits. 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 (in the budget) and appropriated.

There is a debate among legal scholars regarding the constitutionality of the debt ceiling.^[2][3] Some scholars argue that the debt ceiling does not provide the legal authority for the United States to default on its debt.^[4][5][6] Some also argue that the debt ceiling itself is unconstitutional since it does not provide a clear mechanism for the government to meet its constitutional obligation to repay its debts once it meets the borrowing limit.^[2][3]

When the debt ceiling is 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. The Treasury has never reached the point of exhausting extraordinary measures, resulting in a constitutionally questionable default, although, on some occasions, it appeared that Congress might allow a default to take place. If this situation were to occur, it is unclear whether the Treasury would be able to prioritize debt payments to avoid a default on its bond obligations. 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.^[7]

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 designed to be a constraint on the executive's ability to manage the U.S. economy. There is debate, however, on how the U.S. economy should be managed, and whether a debt ceiling is an appropriate or constitutional mechanism for restraining government spending.^{[citation needed]}

Currently, the debt ceiling has been suspended altogether as of June 3, 2023, when U.S. president Joe Biden signed the Fiscal Responsibility Act of 2023 into law.^[8] This ended the debt-ceiling crisis that began on January 19, 2023, and the suspension will remain in effect until January 2, 2025. Previously, in December 2021, the debt ceiling was raised when it was increased by $2.5 trillion,^[9] to $31.381463 trillion, which lasted until January 2023.^[10][11]