What’s the Debt Ceiling, and Will the US Raise It?
The very phrase “debt ceiling” sounds austere and restrictive, as if it’s a lid on government spending. In fact, this cap on US government borrowing affects only the ability to pay existing bills, not to approve more spending. But it has become an explosive political issue with the potential to roil financial markets, since a failure to raise the ceiling could eventually result in a first-ever default on some of the government’s obligations. With time running short, and Treasury Secretary Janet Yellen warning of “an economic and financial catastrophe that will be of our own making,” the debt ceiling has become a subject of political brinkmanship.
The US is getting perilously close to the current federal debt limit of nearly $31.4 trillion, at which point it could lose the ability to meet all payment obligations. Yellen says that moment — the X-date, as it’s known — could arrive by June 1. Since mid-January, her department has been using so-called extraordinary measures — such as withholding regularly scheduled contributions to a federal employee retirement fund — to keep paying debts and delay the reckoning. Once those measures are exhausted, the options get more dire.