Policy Backgrounders

The Debt Ceiling

January 06, 2023

The Constitution (Article I, Section 8) grants Congress the sole authority “to borrow money on the credit of the United States.” Congress has delegated that authority to the Treasury but in 1917 placed a ceiling on the total amount of debt that can be outstanding at one time. Once the debt limit is reached, the Treasury cannot increase the level of outstanding debt. It can spend down any cash on hand, and it can spend any new revenue intake, but the ceiling is a binding limit that effectively prohibits further borrowing.

The debt ceiling stands at roughly $31.4 trillion after legislation passed in December 2021. Trends in current receipts and outlays suggest that the US will reach this limit in roughly July 2023. This could pose a major test for the 118th Congress, with implications for the US’ credit rating and the ability of government to continue operations, including for programs such as Social Security and Medicare as well as for other spending. The issue is already prominent in the selection of the Speaker of the House.