Lifting the debt ceiling refers to the act of increasing or suspending the statutory limit on the amount of debt that the United States government can incur. The debt ceiling is a legal cap set by Congress on the total amount of money that the government can borrow to finance its operations, including paying its bills and obligations. It is a mechanism intended to limit the growth of government debt.
When the government spends more money than it collects in revenue, it covers the shortfall by issuing Treasury bonds and other forms of debt. However, the total amount of debt outstanding cannot exceed the limit set by the debt ceiling. If the debt ceiling is reached and not raised, the government faces the possibility of defaulting on its financial obligations, which would have severe consequences for the economy and financial markets.
To prevent such a default, Congress must pass legislation to increase or suspend the debt ceiling. This action allows the government to continue borrowing money to meet its financial obligations and fund its programs. Lifting the debt ceiling does not authorize new spending or create additional debt; it simply allows the government to borrow the necessary funds to fulfill its existing obligations.
The debate and negotiation over raising the debt ceiling often become politically contentious, as lawmakers may use it as an opportunity to push for changes in fiscal policy or demand concessions on other issues. Failure to raise the debt ceiling in a timely manner can lead to disruptions in government operations, a loss of confidence in the government’s creditworthiness, and potentially significant economic consequences.