The U.S. debt ceiling, currently at $31.4 trillion, has once again become a topic of conversation as the Treasury Secretary recently informed Congress that the limit would be reached by January 19, 2023. This has led to an increase in interest and searches about the debt ceiling on Google Trends.
But what exactly is the debt ceiling and why does it matter?
Contrary to popular belief, the debt ceiling does not allow the government to spend more money. Instead, it is a cap on how much the government can borrow to pay back debts it has already accumulated. If the government reaches the debt ceiling, the Treasury Department will take “extraordinary measures” to avoid defaulting on loans, but ultimately, lawmakers must vote to raise the limit in order to avoid defaulting.
It is important to note that the debt ceiling is not the same as the deficit, which is the difference between what the government raises through taxes and what it spends. The deficit contributes to the overall national debt, but the two are not the same.
Defaulting on loans would have severe consequences for the U.S. and the global economy. However, the U.S. has never defaulted on its loans in the 100 years the debt ceiling has existed.
Some argue that the debt ceiling should be eliminated, but this is a controversial topic and would likely face opposition.
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