The Congress has authorized trillions of dollars in spending over the last decade or so, causing the debt of the United States to almost triple since 2009. Over this period, the ability of the Treasury Department to borrow funds for making payments on that debt has repeatedly run into a congressionally mandated limit on borrowing known as the debt ceiling. Kavan Choksi Finance Expert mentions that very recently both houses of Congress passed the Fiscal Responsibility Act of 2023. This action helped steer clear of the possibility of a government default, enabling the U.S. Department of the Treasury to continue issuing debt in order to meet the federal fiscal needs. The bill suspends the debt ceiling until January 1, 2025.
Kavan Choksi Finance Expert talks about the United States debt ceiling
The United States debt limit or ceiling was created by Congress way back in 1917. It basically sets the maximum amount of the outstanding federal debt the government of the U.S. can incur. The Treasury Department reached its debt ceiling of $31.4 trillion in January 2023, and subsequent to a few months of debate, in June the lawmakers voted to suspend the ceiling until January 2025.
The U.S. government has run a deficit averaging nearly $1 trillion each year since 2001. This means that the government spends far more money than it receives in taxes and other revenue options. In order to make up for the difference and continue to finance payments that Congress has already authorized, the government has to borrow funds. Congressional action to suspend or increase the debt ceiling does not increase the financial commitments of the country, as decisions of spending the funds are legislated separately. Any kind of change to the debt ceiling needs majority approval in the House, as well as sixty votes in the Senate. Over time, efforts to abolish or raise the debt ceiling have steadily become a topic of heated debate among policymakers. Many lawmakers who decry government debt have used negotiations on altering the limit to try to force spending cuts.
It becomes necessary to suspend or increase the debt ceiling when the government has to borrow more money to pay off its debt than it is federally authorized. Raising the ceiling has been a relatively routine procedure for Congress for the last several decades. Whenever the Treasury Department of the United States was unable to pay the bills of the government fast, Congress has typically acted fast. In fact, it has at times unanimously voted to increase the limit on what it could borrow. Since the year of 1960, Congress has increased the ceiling seventy-eight times, most recently in 2021. Forty-nine of these increases were implemented under Republican presidents, while twenty-nine were under Democratic presidents.
As perKavan Choksi Finance Expert, Congress may even opt to suspend the debt ceiling or allow the treasury to supersede the debt limit on a temporary basis, instead of raising it by a particular amount. This move was rather rare during the first ninety years of the ceiling’s existence. However, Congress has suspended the debt limit eight times since 2013, most recently in June 2023.