The debt ceiling, also known as the debt limit, is the maximum amount of money that the U.S. government is legally allowed to borrow to fulfill its existing financial obligations. These obligations include payments for:
Federal employees
Social Security and Medicare benefits
Military salaries
Interest on the national debt
Tax refunds
The current debt limit was reached in January 2023. However, following an agreement made in June 2023, Congress suspended the debt ceiling until January 1, 2025. When the suspension period ends, the debt limit will be reinstated at a level that accommodates the federal borrowing that has occurred up to that point
Evolution of the Debt Ceiling
The debt ceiling was first established in 1917 through the Second Liberty Bond Act. This act was implemented during World War I to give the Treasury more flexibility in issuing debt without requiring specific Congressional approval for each issuance. The initial debt ceiling was set at $11.5 billion in 1917.
This limit was i…