The US could stop financing various social programs, however an increase in the debt ceiling also suggests less control over spending. The Biden Administration warns that unless Congress takes action, the federal government may not be able to pay its bills by June.
What is the debt ceiling?
Every year since 2001, the US government has spent more than the revenue it generates through taxes and fees. The government borrows money to fill the funding gap so it can continue to pay for a variety of federal programs and agencies, from the military to Social Security to Medicare for retirees. The government raises this money by selling interest-bearing securities, such as Treasury bonds.
The debt limit, or debt ceiling, is a federal law that limits the amount of money the United States can borrow to meet these legal spending obligations.
Contrary to some public perceptions, raising the debt ceiling does not authorize the government to spend more money. Congress has ultimate authority over the budget process, and each year lawmakers vote on spending bills. But since 1917, a legal limit has also been placed on the total amount of debt the US government can take on. Raising the debt limit simply authorizes the Treasury Department to make payments on spending that Congress has already approved.
Can it go into default?
Raising the debt ceiling does not authorize the government to spend more money. Congress has ultimate authority over the budget process, and each year lawmakers vote on spending bills. But since 1917, a legal limit has also been placed on the total amount of debt the US government can take on. Raising the debt limit simply authorizes the Treasury Department to make payments on spending that Congress has already approved.
Source: Ambito
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