05 Dec COTW: The U.S. Debt Ceiling
- Created in 1917, the U.S. debt ceiling limits the amount the federal government can owe. It was initially used as a tool to make it easier for government to borrow money. Currently, the U.S. debt ceiling is set at just under $31.38 trillion.
- At present, the total amount of outstanding U.S. debt (which includes debt held by the public, and intragovernmental holdings) is $31.36 trillion, meaning that the U.S. is just $2 billion away from reaching its debt ceiling. Historically, the debt ceiling has been raised as needed to accommodate further increases in U.S. public debt, but given the current split government, this will likely be a highly contested event.
- If the debt ceiling is not raised, the U.S. Treasury can dip into its toolbox of extraordinary measures (which include various accounting measures, and possibly reducing some of its large cash reserves) for a short-term solution. Eventually, if the ceiling is not raised and no action is taken to lower the amount of debt, the U.S. government will legally be unable to borrow money to pay financial obligations. For the time being, however, the Treasury still has sufficient time and wiggle room to make the necessary adjustments and avoid hitting the debt ceiling.
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