What is the debt ceiling?
Congress determines its spending and revenue numbers each year as part of the federal budget process. When the U.S. government spends more than it collects in taxes, it borrows money to pay for the spending Congress has approved—including funding for Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. This borrowed money is the national debt.
There’s some uncertainty in the overall impact, but economists generally agree that millions of Americans would be affected by a default.
The debt ceiling is an artificial limit set by Congress that dictates how much money the U.S. government can borrow. It was first enacted by Congress during World War I to give the Treasury Department blanket authorization to borrow money up to a set amount. As the national debt increases, lawmakers must vote to raise the debt ceiling to ensure that the U.S. government can fulfill its financial obligations. (They also have the option of voting to do away with the limit if they choose to.)
What will happen if lawmakers don’t raise the debt ceiling?
In short, economic calamity. Josh Bivens, an economist at the Economic Policy Institute, has said that “a recession is guaranteed if the debt limit is not raised,” a position held by many economists. Given the outsized role the United States plays in the global economy, that recession would thrust markets across the world into turmoil.
If the limit is not raised, the government will be unable to pay its bills. Government workers would go unpaid, recipients of federal benefits (like Social Security) could miss out on their payments, and unemployment would surge. There’s some uncertainty in the overall impact, but economists generally agree that millions of Americans would be affected by a default.
Why are some lawmakers trying to connect raising the debt ceiling to the yearly budget process?
The debt ceiling and the yearly federal budget are separate processes. Raising the debt ceiling is about paying for commitments that the government has already made. The annual budget, meanwhile, authorizes future spending.
Some lawmakers, however, are using the debt ceiling as leverage to extract concessions, including severe spending cuts, from their fellow lawmakers. Since Congress must raise the debt ceiling, and since the effects of failing to do so would be so catastrophic, they can essentially hold the economy hostage to advance partisan priorities.
The cuts that House leaders are calling for would strip millions of families of access to critical nutrition, housing, and health programs.
Has raising the debt ceiling always been so controversial?
No. This is a manufactured crisis. According to the Treasury Department, “since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit—49 times under Republican presidents and 29 times under Democratic presidents.”
The proposed cuts that some lawmakers are demanding in return for raising the debt ceiling could stall our work for peace and justice for years.
But isn’t it good for lawmakers to encourage fiscal responsibility?
Unfortunately, that’s not really what’s happening here. It’s extremely fiscally irresponsible to threaten a default on the national debt. It would be like buying your groceries on a credit card and then refusing to pay your bill after you’ve already eaten them—if failing to pay your grocery bill could also tank the global economy. As we’ve noted, a default would almost certainly lead to a recession that would imperil millions of Americans’ economic well-being.
What’s more, if lawmakers are truly concerned about lessening the deficit, there are better ways to do it than by slashing some of our most effective, relied-upon assistance programs. Congress could, for instance, find savings in the military budget, which continues to skyrocket toward $1 trillion annually despite the Pentagon having never passed an audit. Or lawmakers could ensure that billionaires and wealthy corporations pay their fair share in taxes.
How does the manufactured debt ceiling crisis affect FCNL’s work for peace and justice?
The proposed cuts that some lawmakers are demanding in return for raising the debt ceiling could stall our work for peace and justice for years. The cuts being considered would limit Congress’s ability to invest in peacebuilding efforts abroad, support violence interrupter programs in our communities, create a more humane migration system, and address the climate crisis, to name just a few of our priorities.
And as previously noted, they could take nutrition assistance, housing assistance, and health care away from millions of low-income individuals and families.
Lawmakers should act swiftly to raise the debt ceiling without conditions. It is irresponsible and unacceptable to gamble on our nation’s future and the fate of the global economy.
