The national debt stands at more than $22 trillion – $22,000,000,000,000.
When the federal government spends more than it collects, it is called “deficit” spending. Currently, the U.S. government is deficit spending approximately $1.2 trillion annually, with future projections rising.
Before 1917, Congress was required to approve each issuance of debt through legislation. During World War I, Congress streamlined the process by establishing a debt ceiling (or limit) to allow borrowing up to a certain level. But the federal government was dealing in billions at the time, not trillions, and probably couldn’t fathom where we find ourselves today.
Each time our national debt reaches the debt ceiling, Congress must pass legislation to raise it. Since 1917, it has been raised nearly 100 times. While historically raising the debt ceiling without much fanfare was commonplace, in recent years it has become a bargaining chip, used as leverage by the White House and/or Congress to achieve budget priorities. In 2011, a showdown over a debt ceiling increase was resolved when President Obama and Congress agreed to the Budget Control Act, which established annual spending caps that congressional appropriators use to delegate monies across government. This agreement was seen as a victory for fiscal conservatives in Washington and helped reduce discretionary spending for four consecutive years, but in recent years, Congress has voted multiple times to raise the caps, undoing much of the progress that was made.
Using a credit card is an easy way to think of the debt ceiling – the money has already been spent and now we must pay the bill. But in this case, before we pay the credit card company, 535 members of Congress weigh in on whether the payment should be made.
So, what happens if Congress opposes raising the debt ceiling on time? The federal government would be in “default” on its debt, leading the U.S. Department of Treasury to decide which debt to pay. Would it pay entitlements to individuals, like Social Security or health care benefits, or interest payments on the debt? Obviously the repercussions could be far reaching, but fortunately, to date Congress has always lifted the debt ceiling before default.
As we mentioned in a previous post, the federal government has again reached its borrowing limit and Congress is facing yet another vote on whether or not to raise it. The administration has said that a default is likely to occur late summer and new projections indicate it could occur in early September if Congress does not act. Coincidentally, government funding runs out on September 30.
Negotiations are ongoing on raising the debt ceiling once again and will likely be paired with negotiations regarding fiscal year 2020 spending levels. While unnerving to be cutting it close once again, the reality is that it’s only a matter of time before debt limit is raised.
Wiles is senior vice president at Bridge Public Affairs, with sixteen years of experience in the U.S. Senate, both on Capitol Hill and in Tennessee. He is an expert on the federal appropriations process, serving in Washington between 2010 and 2015 as a professional staff member of the U.S. Senate Appropriations Committee under the direction of Chairman Richard Shelby (R-AL) and Lisa Murkowski (R-AK).