The Debt Ceiling

Before World War I Congress approved each federal borrowing individually. To give the Treasury flexibility to finance the war, the Second Liberty Bond Act of 1917 let it issue bonds up to an aggregate limit, and in 1939 Congress set a single limit on nearly all federal debt. The debt ceiling does not authorize new spending. It caps the borrowing needed to pay for spending and tax cuts Congress has already enacted, so when the government runs deficits, the limit must eventually be raised or suspended or the Treasury cannot pay its obligations.

Congress has raised, extended, or revised the limit about eighty times since 1960, under presidents of both parties. When the Treasury reaches the limit, the Secretary uses so-called extraordinary measures, accounting maneuvers such as suspending investments in certain federal retirement funds, to keep paying bills for several months. The day those measures run out is known as the X-date. The United States has never defaulted on its debt, but standoffs in 2011 and 2023 came within days, and the 2011 crisis led Standard and Poor's to downgrade the federal credit rating for the first time.

The 2023 Fiscal Responsibility Act suspended the limit until January 2025, and the 2025 budget law raised it by five trillion dollars, to about 41.1 trillion. Critics argue the ceiling serves only to create recurring crises over bills already incurred, and that Denmark is the only other democracy with anything similar. Proposals range from abolishing it, to letting the Treasury Secretary raise it automatically, to legal theories that the Fourteenth Amendment, which says the validity of the public debt shall not be questioned, makes the limit unconstitutional. Defenders say it is one of the few moments that force Congress to confront the growth of debt.