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The debt limit, also known as the debt ceiling, is the maximum amount of money that 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 the Congress.
Following two years of suspension, the federal debt limit was reset on August 1, 2021, at the level outstanding at that time ($28.4 trillion). After the debt limit was reinstated, the Treasury began to draw down its cash balance and resort to “extraordinary measures” to continue borrowing to finance the deficit. Before breaching the federal borrowing limit, lawmakers on October 14 enacted legislation to increase the debt limit to $28.9 trillion, which is expected to finance government activities through at least early December.
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/5QwAW+ via @pgpfoundation