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How Does The Debt Ceiling Affect Me?

How Does The Debt Ceiling Affect Me?

Congress has until March 15 to raise the federal debt ceiling. If not, the government may default on its debt.

But Americans have heard this story many times in recent years. Throughout former President Barack Obama’s term, Congressional Republicans used debt ceiling deadlines as leverage to negotiate on budget items. So, what should Americans know about the upcoming March 15 deadline?

What Is A Debt Ceiling?

First of all, it’s important to know exactly what the debt ceiling represents. The debt ceiling is a limit that Congress sets periodically on the total amount of debt that the federal government is allowed.

Raising the debt ceiling is not a license for the government to spend more money. Instead, a higher debt ceiling simply allows the Treasury to continue to borrow the money that it needs to make the payments already approved by Congress.

For some reason, the debt ceiling has become a point of contention in recent years, but raising the debt ceiling has been a regular event over the past century. In fact, since 1940, the debt ceiling has been adjusted 95 times.

So, what makes the current debt ceiling debate special? At this time, the answer to that question is unclear.

Cataclysmic Reactions Or Nothing More Than A Shrug?

The March 15 deadline has been in place since it was agreed upon two years ago by the Obama administration and Congress.

In theory, if the debt ceiling is not raised by the deadline, the United States would go into default on its debt. On the surface, that seems like a potentially catastrophic event. In reality, it might not be.

“I do believe that defaulting on America’s debts would have grave worldwide economic consequences,” head of the Office of Management and Budget Mick Mulvaney said. “I do not believe that breaching the debt ceiling will automatically or inevitably lead to that result.”

In other words, even if the debt ceiling deadline passes with no agreement, global investors may not even care. Everyone knows the United States has the means to pay its bills, even if Congress temporary refuses to do so. In all likelihood, a deal will be reached before the deadline anyway, since Congress seems to have little to gain by letting it lapse.

Much like they did under Obama, Congressional Republicans are likely just using the deadline as an opportunity to raise concerns over President Donald Trump’s proposed policies of aggressive infrastructure and military spending and major corporate tax cuts.

The Congressional Budget Office projects the federal debt will grow by $10 trillion over the next decade under Trump’s policies.

Related Link: Potential Outcomes For The Debt Dilemma, According To Dick Bove

Related Link: America's Trade Deficit Since 1992 In One Chart


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