Why do we have a debt ceiling?

The U.S. Capitol Building is seen at sunset in Washington
Editor's note:

In Unpacked, Brookings experts provide analysis of Trump administration policies and news.

THE ISSUE: If the Trump Administration and Congress cannot agree on how to raise the U.S. debt limit by around September 29, the Treasury Department will run out of money to pay its bills, including interest payments on the national debt and government obligations ranging from military salaries to social security checks.

The problem with the debt ceiling is that it attempts to stop the debt without directly addressing the processes that generate the debt.


  • The debt ceiling took on something like its current shape during World War I, when Congress wanted to give the U.S. Treasury Department more discretion to manage the debt. There was never much deliberation in later choosing to use the debt ceiling as a tool for Congress to control the debt.
  • This eventually evolved into the debt ceiling we have today, which is one legal limit on the amount of borrowing the Treasury can do, which Congress periodically raises it.
  • Currently, the U.S. federal government debt is about $20 trillion.
  • Surveys show the American public thinks a hard ceiling on the debt is a good idea because government debt sounds bad. Raising the debt limit is also opposed by a majority.
  • The problem with the debt ceiling is that it attempts to stop the debt without directly addressing the processes that generate the debt.
  • We have an appropriations process where we decide what to spend on discretionary spending, we have entitlement statutes that obligate our spending, and we have tax laws that determine how much revenue comes in—those are the laws that actually determine how indebted this country will become, and the debt ceiling is an afterthought.
  • A default on the debt and a government shutdown are actually two separate things, though they are often rolled together in media coverage.
  • We could raise the debt limit so that we have no problem servicing the debt while still shutting the government down.
  • If Congress and the president were to fail to raise the debt ceiling by the looming deadline, we could miss a payment. Continuing to miss payments over a protracted period of weeks or months would be disastrous. Suddenly, the U.S. debt that is treated as risk-free collateral by the global financial system would start to look risky, and that would likely cause a very bad financial crisis.
  • If only one payment was missed, there is a good reason to think that it could be treated as an unfortunate misunderstanding and get back on track quickly, with Congress and the president raising the debt ceiling and making payments with late fees attached in a matter of days.
  • The debt ceiling is the only thing potentially preventing the U.S. government from making its debt payments on time.
  • It’s difficult to eliminate the debt ceiling for a number of reasons—there’s the facial logical appeal of the idea, it polls well with the public, and it’s a politically costly to eliminate.
  • Beyond the politics, there’s a sophisticated defense of the debt ceiling by some fiscal conservatives—it provides a good opportunity for us to periodically revisit the debt, and it will give fiscal conservatives a chance to make some demands to discipline government spending going forward.
  • The problem, in practice, is that the debt limit tends to draw fiscal conservatives’ fire away from the fights that are most consequential—and in a debt ceiling fight, they’ll inevitably have to concede everything important because the debt ceiling really has to be raised.


The Hutchins Center Explains: The debt limit

Minimizing debt ceiling crises: Principles and practical advice

The fiscal fights of the Obama administration: An interactive timeline