What Is a Statutory Debt Limit?

This limit, set by Congress, is the ceiling for how much debt that𓆏 the U.S. government can take on. It includes interest payments on existing debt. Once the government reaches the statutory debt limit, it cannot take on new obligations.

Understanding the Statutory Debt Limit

Under the U.S. Con꧃stitution, Congress has the power to borrow money. Prior to 1939, this meant that Congress would pass legislation authorizing the Treasury to issue specific amounts of bonds to raise funds for purposes specified in the legislatio🔯n.

However, other than these specified amounts of earmarked borrowing, the Treasury was not authorized to borrow money on its own authority, and the U.S. government did not maintain a large revolving debt burden as a normal means of financing ongoing general spending, such as for paying for public services, government salaries, entitlements like Medicare, and tax refunds. 

In 1939, Congress passed the Public Debt Act, which, along with subsequent amendments, delegated Congress's power to borrow money to the Treasury as long as the total consolidated federal debt stayed under the statutory debt limit set by the Act. This was a radical break🌌 from previous policy, effectively transferring by statute the constituti💛onally enumerated power to borrow from the legislative branch to the executive branch of government.

Special Considerations

Still, only the U.S. Congress has the authority to raise the statutory debt limit, which it has done more or less routinely, though not without occasional contention. Raising the statutory debt limit has occurred 78 times since 1960. Raising the threshold has taken several different forms, such as redefining the debt limit, allowing a temporary extension to the ceiling, and permanently raising the limit. The debt limit has been raised 49 times under Republican presidents and 29 times under Democratic presidents.

Though some politicians known as 澳洲幸运5官方开奖结果体彩网:deficit hawks disapprove of raising the debt limit, Congress has reg🌳ularly raised the ceiling to avoid defaulting on already committed government payments.

Those who supp🗹ort raising the debt ceiling argue that refusing to raise the debt limit would lead to the Treasury defaulting on its debts, which would ღbe catastrophic for the U.S. economy. In such an event, those living on Social Security would not receive their monthly payments, members of the military would go unpaid, large segments of the U.S. economy would experience great upheaval, and an unprecedented national economic crisis would ensue. 

The tension between the two sides has led to several episodes when budget negotiations have broken down, delaying the Treasury’s ability to expand the federal debt. Such a delay forces government shutdowns. During these shutdowns, government agencies are usually required t🌊o restrict spending or temporarily suspend some operations.

Critics claim that government agencies then selectively cut back their most popular services so as to cause as much discomfort and outrage among the public as possible, in what is often called Washington Monument Syndrome.  

The Evolution of the Debt Limit

When Congress opts to raise the debt limit, the (CBO) calculates an “X-date." The X-🗹date refers to the day that the government will likely exhaust its debt extension and need to extend the limit further, assuming that it has not increased its income and paid off debts. 

The government gets income through taxes, so raising taxes could be one way to increase revenue to pay off debts. Alternatively, the governm🎶ent may choose to cut spending—restricting the funds it spends on infrastructure, the military, and other needs. The money saved through these cuts can also help prevent raising the debt ceiling.

The first statutory debt limit set in the U.S. was set at $45 billion in 1939. However, Congress raised the ceiling annually during the duration of World War II. By 1946, the limit had reached $300 billion. Over the following decades, it continued to rise as federal government spending and deficits grew. In 2013, instead of raising the limit, Congress temporarily suspended it, allowing the Treasury to borrow whatever funds it needs to finance government spending. 

Temporary suspensions of the debt limit have become the new normal in the federal budgetary process. For instance, in a 2019 budget deal between Congress and the Trump administration, the debt limit was suspended for two years, allowing the Treasury to borrow without limit during that period. The deal set the debt limit in 2021 based on whatever the actual debt would be at that point; the limit was finalized at $31.4 trillion in December 2021. In January 2023, having reached that limit, the Treasury suspended the statutory debt limit. It later estimated the government's ability to meet its obligations using extraordinary measures could expire as soon as June 2023.

In May 2023, with a potentially catastrophic default on the line, the Biden administration successfully completed negotiations with members of Congress to draft a bipartisan budget deal in tandem with House Speaker Kevin McCarthy. The plan suspended the debt limit until 2025 and capped discretionary funding for fiscal years 2024 and 2025.

In January 2025, the U.S. government hit is limit, and is paying its bills through borrowing by using "extrao🎀rdinary measures." President Donald Trump has proposed eliminating the debt limit, but legislators rejected the idea.

The Bottom Line

The practice of temporary, but repeated and ongoing, suspensions of the statutory debt limit effectively has put an end to the debt limit as a c๊onstraint on federal borrowing (and spending) for the time being. However, when the federal government runs out of money to cover its obligat🐠ions, the resulting funding interruptions can have stark consequences.