What Is a Debt Ceiling?

The national debt is a growing concern to millions of Americans. The U.S. Treasury has the daunting task of paying national bills and managing the debt load. The debt ceiling is a tactic used by the Treasury to limit the amount of debt at a given time.

Identification

The debt ceiling, or the Statutory Debt Limit, is used by the U.S. Treasury to manage national debt. The debt ceiling is created in order to stop the amount of debt the Treasury can issue once the ceiling is met. On the other hand, the ceiling can be raised at anytime with an act of Congress.

History

The statutory debt limit is created to manage debt and established with the Second Liberty Bond Act of 1917. The act was created to limit the amount of public debt issued.

Significance

Congress regularly raises the debt ceiling to avoid defaulting on national debt, as well as avoid suspension of government operations. In 2009, the U.S. Congress voted to raise the debt ceiling during the financial crisis. It was increase $290 billion to total $12.4 trillion.

References

• Forbes Investopedia: Statutory Debt Limit

Resources

• Forbes Investopedia: What Fuels the National Debt?