National Debt Ceiling - What is it? - 2/17/2023
Updated: Jul 30
The National Debt Ceiling, if and when it will be raised, and how it will be dealt with, is all over the news. What it really means and how much it directly affects us is the question.
The debt ceiling is basically the United States' credit limit, though we do it by issuing bonds rather than using a credit card. The debt ceiling was created with the Second Liberty Bond Act of 1917. Before the Second Liberty Bond Act, Congress had to authorize each bond issue to raise money.
The debt limit is not about current spending. It is about paying for previous spending decisions and cannot necessarily be blamed on one party or the other. The debt ceiling has been raised almost 100 times in the over 105 years it has existed.
The US is not currently in default, and hopefully the debt ceiling will be raised before that becomes an issue. If the debt limit situation is not dealt with it can become a significant problem both in the US and abroad. It could affect both US and global financial markets since the US currency is a significant player in the world economy. If the US goes into default it could result in a credit rating downgrade, the potential of a recession, increased unemployment, and federal benefits payments (such as social security) may be put on hold.
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