WASHINGTON, D.C. — Lawmakers took action Thursday to keep the federal government open until early December but they are not raising the debt limit, at least not yet. That puts the country in a position to possibly default on its bills for the first time ever on October 18th.
So what is this debt limit? Do other countries have similar debates and why does it exist in the first place?
What is the Debt Limit?
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.
The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans – putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession.
Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents. Congressional leaders in both parties have recognized that this is necessary.
The stalemate over the debt ceiling continued on Capitol Hill and social Security checks, military pay, child tax credit payments are all hanging in the balance. And Congress has until October 18th to get it done.
The debt ceiling is "The amount of money the government can borrow to pay its bills." Somewhat like your credit card limit. Currently, the debt ceiling is $28.4 trillion which is right around the amount of federal debt the U.S. has.
Treasury Secretary Janet Yellen needs the debt limit raised so she can borrow more money to pay the nation's bills, like sending out your loved one's social security check.
If you are wondering if all countries have to deal with the debt ceiling, it is for the most part a uniquely American issue. The UK, Japan, Canada, Germany, and France, don't have debt ceiling votes like this. Only two countries have debt limit rules, Denmark and Poland, but economists say it's not really controversial in those countries.
The debt ceiling issue exists in the U.S mainly because of our Constitution. Article 1, Section 8 says “Congress shall have power to borrow money on the credit of the United States”
U.S. Constitution
Article I
- Section 8
- Clause 1
- The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
- Clause 2
- To borrow Money on the credit of the United States;
In 1917, during World War I, Congress gave the Treasury Department more flexibility to borrow money. The first official debt limit was set at $45 billion in 1939.
According to the Treasury Department's website, since 1960, Congress has acted 78 separate times to raise the debt limit. Our country has never let it lapse. Although lawmakers came close twice during the Obama presidency.