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The debt limit, also known as the debt ceiling, is the maximum amount of money the U.S. Treasury can borrow. Increasing the debt limit allows the Treasury to borrow funds to pay for government obligations that have already been incurred as the result of laws and budgets approved by the President and Congress.
The debt limit was suspended through July 31, 2021. On August 1, the limit was reset at the level of gross federal debt that was outstanding at that time. Now, the Treasury will have to draw down its cash balance or resort to “extraordinary measures” to continue borrowing to finance the deficit.
Why is understanding the debt limit important and what are the implications for our economy and our fiscal condition? The infographic below explains. For more details, see our analysis on the debt limit.
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Feel free to share this infographic on Twitter.Tweet: Policymakers have come together repeatedly over the years to avoid default by raising the #DebtLimit, no matter which party is in power. https://ctt.ec/d6eWJ+ via @pgpfoundation