Congress has been given the deadline of Dec. 3, 2021, to raise the debt ceiling, though it isn’t clear if an agreement will be reached in time. Congress nearly missed the deadline to increase spending limits in Oct. 2021, which would have resulted in yet another government shutdown.
What's the debt ceiling, and why is Congress being pressured to raise it?
The debt ceiling, explained
The debt ceiling refers to the maximum amount of money the government can borrow to cover expenses such as Social Security and Medicare benefits, tax refunds, and military salaries. The term “debt ceiling” is often used interchangeably with “debt limit.”
The debt limit doesn't exactly allow the government to take up “new spending commitments,” according to the U.S. Department of the Treasury, but instead, it allows the government to “finance existing legal obligations that Congresses and presidents of both parties have made in the past.”
When the debt limit isn't increased, it can have devastating effects on the economy. The government would “default on its legal obligations,” which could cause other types of financial crises. Since 2001, the U.S. has been spending more than it sees in taxes and revenue, causing the country to run on a budget deficit.
In 2019, the U.S. debt limit reached $1 trillion, and then increased to more than $3 trillion around the time the COVID-19 pandemic hit. Though the amount the U.S. has acquired in debt did drop in 2021 to just over $2.5 trillion, it hasn't experienced a well-needed surplus in years.
In July 2019, Congress agreed to suspend the debt limit until July 31, 2021. Once it was reinstated on Aug. 1, the limit was then raised to $28.5 trillion.
How many times has the debt ceiling been raised?
Though the discussion of raising the debt ceiling is one that seems to get a lot of attention lately, this process of increasing government spending limits has been going on for years. Since 1960, Congress has stepped up on several occasions to raise or temporarily extend the debt ceiling, or revise what the debt limit means. Congress has had to act 49 times while the U.S. was led by Republican presidents and 29 times under Democratic presidents.
What happens if the debt ceiling isn't raised prior to Dec. 3, 2021?
Unless Republicans and Democrats can find a way to revise the government’s spending limit or repeal the debt limit altogether, Treasury reportedly “only has enough funds to pay the country’s bills through early December.” Sadly, a full or partial government shutdown often happens in conjunction with hitting the debt ceiling.
Treasury Secretary Janet L. Yellen has already shown support for abolishing the debt limit, claiming that "the borrowing cap is "destructive" and poses unncesary risks to the economy, reports The New York Times.