The debt ceiling or the debt limit implies to the maximum sum of money that the United States can borrow cumulatively for the purpose of meeting its existing legal obligations.
Kavan Choksi / カヴァン・チョクシ mentions that the debt ceiling was created under the Second Liberty Bond Act of 1917. In case the government national debt levels of the United States bump up against the ceiling, the Treasury Department of the country should resort to other extraordinary measures for paying off government expenses and obligations till the ceiling is raised again. Over the years, debt ceiling has been raised or suspended multiple times in order to steer clear of the worst-case scenario, which would be a default by the U.S. government on its debt.
Kavan Choksi / カヴァン・チョクシ briefly discusses the United States debt ceiling
Before the debt ceiling was created, Congress had free rein over the finances of the country. The debt ceiling was created during World War I, in 1917, to make the federal government fiscally responsible. The debt ceiling has been raised over time, whenever the United States has approached the limit. Hitting the debt limit and not being able to pay interest payments to bondholders would cause the United States to default, which can essentially increase the cost of its debt and lower its credit rating. The majority of the democratic nations do not have a debt ceiling, and hence the United States is one of the very few exceptions.
Having a debt ceiling in place is considered to be pretty practical as it helps in keeping the finances of the United States in check. It also allows the U.S. Treasury to issue bonds with ease, without having to get approval from Congress every time the federal government requires to raise funds, which can be quite a cumbersome process. The debt ceiling provides proper boundaries that allow for an efficient monetary approval process. Raising the debt ceiling provides the nation with the necessary wiggle room to keep funding discerning federal operations. Basically, it provides business leaders with the required financial power to keep the government running seamlessly. The debt ceiling also provides the required means to continue funding vital social programs. This means that the government may fund Social Security and Medicare, both of which are vital for retirees and qualifying recipients.
As Kavan Choksi / カヴァン・チョクシ says, the debt ceiling is notoriously fluid, and hence can be raised easily. It has been raised several times over the years, which also raises concerns about whether it is an effective tool to ensure fiscal responsibility or not. The U.S. has reached record-high levels of debt over time, and increasing the debt ceiling tends to have an inverse impact on the reputation of the country in the global markets. There are also certain people who consider the debt ceiling to be unconstitutional. Critics point out that the 14th Amendment requires the government to meet its financial obligations and having a debt ceiling puts pressure on the ability of the country to pay its bills.