United States debt ceiling
In the United States, the debt ceiling is a law limiting the total amount of money the federal government can borrow. Since 2025, the debt ceiling is $41.1 trillion after being raised by $5 trillion through the "One Big Beautiful Bill Act" (OBBBA). The debt ceiling is expected to breach by 2027. The U.S. government has borrowed to finance its budget since 2002, running a structural budge
Overview
In the United States, the debt ceiling is a law limiting the total amount of money the federal government can borrow. Since 2025, the debt ceiling is $41.1 trillion after being raised by $5 trillion through the "One Big Beautiful Bill Act" (OBBBA). The debt ceiling is expected to breach by 2027. The U.S. government has borrowed to finance its budget since 2002, running a structural budget deficit. The ceiling does not directly limit the size of the budget deficit but rather the total national debt the U.S. is able to borrow. The debt ceiling is an aggregate figure that applies to gross debt, which includes debt in the hands of the public and intra-government accounts. The debt ceiling was enacted in 1917 to control government borrowing. There is debate about whether the debt ceiling is constitutional with scholars questioning its legal authority and mechanisms to repay its debt. When the debt ceiling is approached or hit, the U.S. Treasury must resort to "extraordinary measures" to temporarily finance government expenditures and obligations. A debt ceiling breach and protracted default could trigger a widespread financial crisis and put the American economy into a recession. Due to the systematic importance of the debt ceiling, its abolition has been called for across the political spectrum since the 21st century.
Background
Under Article I Section 8 of the United States Constitution, only Congress can authorize the borrowing of money on the credit of the United States. From the founding of the U.S. until 1917, Congress directly authorized each debt issued. To provide more flexibility to finance the United States' involvement in World War I, Congress modified the method by which it authorized debt in the Second Liberty Bond Act of 1917. Under this Act, Congress established an aggregate limit, or "ceiling," on the total amount of new bonds that could be issued. The present debt ceiling is an aggregate limit applied to nearly all federal debt, which was substantially established by the Public Debt Acts of 1939 and 1941. These acts have been amended subsequently to change the ceiling amount. From time to time, political disputes arise when the Treasury advises Congress that the debt ceiling is about to be reached and indicates that a default is imminent. When the debt ceiling is reached, and pending an increase in the limit, Treasury may resort to "extraordinary measures" to buy more time before the ceiling can be raised by Congress. The U.S. is claimed to have never reached the point of default where the Treasury was incapable of paying U.S. debt obligations. Exceptions include a three-month period during the War of 1812 when parts of Washington D.C. including the Treasury were burned and a processing error in 1979. In 2011, the U.S. reached a crisis point of near default on public debt. The delay in raising the debt ceiling resulted in the first downgrade in the United States credit rating, a sharp drop in the stock market, and an increase in borrowing costs. Congress raised the debt limit with the Budget Control Act of 2011, which added to the fiscal cliff when the new ceiling was reached on December 31, 2012.
Relationship to federal budget
The process of setting the debt ceiling is separate and distinct from the United States budget process, and raising the debt ceiling neither directly increases nor decreases the budget deficit, and vice versa. The Government Accountability Office explains, "the debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred." The President formulates a federal budget every year, which Congress must pass, sometimes with amendments, in a concurrent resolution, which does not require the President's signature and is not binding. The budget details projected tax collections and expenditures and, therefore, specifies the estimated amount of borrowing the government would have to do in that fiscal year.
Debt not covered by ceiling
In December 2012, the Treasury calculated that $239 million in United States Notes were in circulation, which in accordance with the debt ceiling legislation, are excluded from the statutory debt limit. The $239 million excludes $25 million in U.S. Notes issued prior to July 1, 1929, determined pursuant to Act of June 30, 1961, 31 U.S.C. 5119, to have been destroyed or irretrievably lost. Debts of the Federal Financing Bank are not debts of the government per se and therefore are also not subject to the ceiling, but have a separate limit of $15 billion.
Legislative history
Before 1917, the U.S. had no debt ceiling. Congress either authorized specific loans or allowed the Treasury to issue certain debt instruments and individual debt issues for specific purposes. Sometimes Congress gave the Treasury discretion over what type of debt instrument would be issued. The United States first instituted a statutory debt limit with the Second Liberty Bond Act of 1917. This legislation set limits on the aggregate amount of debt that could be accumulated through individual categories of debt (such as bonds and bills). In 1939, Congress instituted the first limit on total accumulated debt over all kinds of instruments. In 1953, the U.S. Treasury risked reaching the debt ceiling of $275 billion. Though President Eisenhower requested that Congress increase it on July 30, 1953, the Senate refused to act on it. As a result, the president asked federal agencies to reduce how much they spent, plus the Treasury Department used its cash balances with banks to stay under the debt ceiling. And, starting in November 1953, Treasury monetized close to $1 billion of gold left over in its vaults, which helped keep it from exceeding the $275 billion limit. During spring and summer 1954, the Senate and the executive branch negotiated on a debt ceiling increase, and a $6 billion one was passed on August 28, 1954. Before the Budget and Impoundment Control Act of 1974, the debt ceiling played an important role in enabling Congress to hold hearings and debates on the budget. James Surowiecki argued that the debt ceiling lost its usefulness after these reforms to the budget process. In 1979, noting the potential problems of hitting a default, Dick Gephardt imposed the "Gephardt Rule," a parliamentary rule that deemed the debt ceiling was raised when a budget was passed. This resolved the contradiction in voting for appropriations but not voting to fund them. The rule stood until it was repealed by the Republican-controlled Congress in 1995. A vote to increase the debt ceiling has usually been (since the 1950s) a legal budgetary formality between the President and Congress. As of 1993 the debt ceiling had not historically been a political issue that would make the elected government fail to pass a yearly budget.
Ronald Reagan and George H. W. Bush
Under the two terms of President Ronald Reagan, the House was controlled by Democrats, and the Senate was, at various points, under the control of both parties. Early in his term, Reagan faced some bipartisan resistance from Congress for a 1981 raising of the debt limit. But Democrats, using the Gephardt Rule, joined with Republicans to increase the debt ceiling eighteen separate times. Under President George H.W. Bush, Democrats controlled both the House and Senate. Again using the Gephardt Rule, Congress increased the debt ceiling nine times without controversy.
Bill Clinton
The debt-ceiling debate of 1995 led to a showdown on the federal budget and resulted in the U.S. federal government shutdowns of 1995 and 1996. In all, Congress raised the debt ceiling eight times during the Clinton Administration.
George W. Bush
While George W. Bush was President, both Republicans and Democrats controlled the House and the Senate at various points during his term. Congress increased the debt ceiling eight times in 2002, 2003, 2004, 2006, 2007, and twice in 2008. When Republicans were in the majority, they consistently voted to increase the debt ceiling. While some Democrats did vote against the debt ceiling when the process was controlled by a Republican majority, Democrats did not filibuster debt limit increases in 2003, 2004 and 2006, allowing Senate Republicans to raise the debt limit with a simple majority. When Democrats controlled the House and the Senate in the last two years of George W. Bush's term, Democratic majorities in the House and the Senate reinstated the automatic Gephardt Rule and increased the debt ceiling three times without attaching preconditions.
Barack Obama
In 2011, Republicans took control of Congress and again suspended the Gephardt Rule as they had under Clinton. The Republican majority in Congress demanded deficit reduction as part of raising the debt ceiling. The resulting contention was resolved on August 2, 2011, by the Budget Control Act of 2011. Under the "McConnell Rule," the president was allowed to unilaterally raise the debt ceiling. This action could be overturned by an act of Congress, but this would require a 2⁄3 majority vote in both houses assuming that the president vetoed the act. On August 5, 2011, Standard & Poors issued the first ever downgrade in the federal government's credit rating, citing their April warnings, the difficulty of bridging the parties and that the resulting agreement fell well short of the hoped-for comprehensive 'grand bargain'. The credit downgrade and debt ceiling debacle contributed to the Dow Jones Industrial Average (DJIA) falling nearly 2,000 points in late July and August. Following the downgrade itself, the DJIA had one of its worst days in history and fell 635 points on August 8. Following the increase in the debt ceiling to $16.394 trillion in 2011, the U.S. again reached the debt ceiling on December 31, 2012, and the Treasury began taking extraordinary measures, which were expected to be exhausted by February 15. The fiscal cliff was resolved with the passage of the American Taxpayer Relief Act of 2012 (ATRA), but no action was taken on the debt ceiling. Following the tax cuts from ATRA, the government needed to raise the debt ceiling by $700 billion to finance operations for the rest of the 2013 fiscal year. The Treasury said it was not set up to prioritize payments and had given the opinion that it is unclear whether it would be legal to do so. Given this situation, the Treasury would simply delay payments if funds could not be raised through extraordinary measures and the debt ceiling was not raised. Economists estimated that such an action would cause GDP to contract by 7 percent, which is larger than the contraction during the Great Recession. The economic damage would worsen as recipients of social security benefits, government contracts, and other government payments cut back on spending in response to the freeze in their revenue. The 2013 crisis was temporarily resolved on February 4, 2013, when President Barack Obama signed the No Budget, No Pay Act of 2013 which suspended the debt ceiling until May 19, 2013. On May 19, the debt ceiling was raised to approximately $16.699 trillion to accommodate the borrowing done during the suspension period. During the suspension period, the Treasury was authorized to borrow to the extent that it "is required to meet existing commitments". On May 19, the debt ceiling was raised by $306 billion to cover the borrowings done during the suspension period, as well as commitments that accrued in the preceding period that extraordinary measures were in place, which commenced on December 31, 2012. Treasury Secretary Jack Lew notified Congress that these measures would be exhausted by October 17, 2013 and that a default would occur on October 17 when interest payments came due. From October 17, 2013 until February 7, 2014, the debt ceiling was again suspended. On February 12, 2014, the Temporary Debt Limit Extension Act was passed, suspending the debt ceiling until March 15, 2015. At that time, the Treasury Department took extraordinary measures. The debt ceiling would again have been reached on November 3, 2015. But on October 30, 2015, the debt ceiling was suspended to March 2017.
Donald Trump's first term
When Donald Trump was President, the debt ceiling was subject to less partisan controversy. The administration and the Republicans who controlled the House and the Senate prioritized tax cuts over a balanced budget. The ceiling was suspended three times: from September 30, 2017, to December 8, 2017; from December 8, 2017 to March 1, 2019; and, after concerns were raised from Treasury in July 2019 of an unexpected shortfall due to reduced tax receipts under Trump's tax legislation, from August 2, 2019 to July 31, 2021. The debt ceiling was raised when it was increased by $2.5 trillion, to $31.38 trillion, which lasted until January 2023. After the 2024 United States presidential election, Donald Trump supported eliminating the debt ceiling. Congress did not impose any preconditions or significant spending cuts. Democrats in the Senate could have threatened to stop the debt ceiling increase by use of the filibuster but declined to do so.
Joe Biden
During Biden's first two years as president, the House and Senate were both controlled by the Democratic Party. In October 2021, the debt ceiling was increased by $480 billion, as a temporary measure requiring fresh legislation by December 3, 2021. That month, Congress voted to increase it by $2.5 trillion, which President Biden signed into effect on December 16, 2021. At that point, it was set at about $31.4 trillion. On January 19, 2023, the United States hit its debt ceiling of $31.4 trillion. At this time, Republicans had taken control of the House during the 2022 midterm elections. Although Republicans were a minority in the Senate, they threatened for the first time in American history to use the filibuster to stop the debt ceiling increase. On June 3, 2023, the debt ceiling was suspended when U.S. president Joe Biden signed the Fiscal Responsibility Act of 2023 into law. This ended the debt-ceiling crisis that began on January 19, 2023; the debt ceiling suspension remained in effect until December 31, 2024.
Donald Trump's second term
Following his second election in November 2024, Donald Trump called for the abolition of the debt ceiling. The debt ceiling was raised by $5 trillion with the passage of the One Big Beautiful Bill Act.
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