--- title: What the Debt Ceiling Is and Why It Matters description: The debt ceiling is the amount of money the U.S. is allowed to borrow to pay for all of its commitments. canonical: https://time.com/6247877/what-is-debt-ceiling-congress/ author: Mini Racker article:opinion: false article:content_tier: free article:published_time: 2023-01-17T21:57:43.000Z article:modified_time: 2026-10-19T07:06:22.046Z article:section: Politics og:title: What Happens if Congress Refuses to Raise the Debt Ceiling? og:description: Despite political messaging around the debt ceiling, Congress is not authorizing new spending when it votes to raise it og:url: https://time.com/6247877/what-is-debt-ceiling-congress/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt3a824aa305d14075/698a398516d8840535c3b77a/GettyImages-1454227207.jpg?branch=production&width=1024&quality=75&auto=webp&crop=16:9 og:image:width: 1024 og:image:height: 576 og:image:alt: House Continues Voting For New Speaker After Three Failed Attempts og:type: article twitter:card: summary_large_image twitter:title: What Happens if Congress Refuses to Raise the Debt Ceiling? twitter:description: Despite political messaging around the debt ceiling, Congress is not authorizing new spending when it votes to raise it twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt3a824aa305d14075/698a398516d8840535c3b77a/GettyImages-1454227207.jpg?branch=production&width=1024&quality=75&auto=webp&crop=16:9 video:duration: 01:51 video:published: 2023-01-19 section: politics topics: debt ceiling, debt limit, default, House Republicans, Congress, Treasury Department, White House briefing, bipartisan precedent, constitutional responsibility, full faith and credit, federal spending, government borrowing genre: press briefing, news tones: firm, formal, urgent, insistent emotions: concern (medium), determination (high), frustration (low) sentiment: neutral audience: political news followers, policy analysts, economists, general news audience, business readers people: Kevin McCarthy, Joe Biden organizations: White House, House Republicans, Treasury Department, Congress, Democrats content_suitability: politics [00:00-01:51]; financial distress [00:04-01:51] transcript_source: automatic transcription transcript_reviewed: not applicable ---  # Why the Debt Ceiling Matters and What Happens if Congress Refuses to Raise It > Sponsored content. 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It explains the politics, personalities and power dynamics behind the headlines, twice a week. #### Where can I get analysis of Washington politics by email? D.C. Brief is TIME's free Washington politics newsletter, available at time.com/newsletters. It is written by a TIME senior correspondent who covers the capital full time. #### Who writes TIME's D.C. Brief? Philip Elliott, a senior correspondent at TIME, writes D.C. Brief. #### Is D.C. Brief free? Yes. D.C. Brief is free at time.com/newsletters. ### Sources * TIME Newsletters: [time.com/newsletters](/c/time-nl-dcbrief-2026q3/newsletters?i=2ce64e25-36ca-4420-9dab-f80cd32335bc&cr=time-nl-dcbrief-2026q3-v1) ## Video: In Debt Ceiling Fight, Kevin McCarthy Can Either Crash the Economy or Blink [Watch (HLS stream): In Debt Ceiling Fight, Kevin McCarthy Can Either Crash the Economy or Blink](https://cdn.jwplayer.com/manifests/GiiBJCMf.m3u8) (1:51)  _Published 2023-01-19. On Thursday, according to the Treasury Department, Washington is set to hit its limit on borrowing, meaning money already spent whose bills come due. Now, Treasury can take so-called extraordinary measures to kick the can down the road for a few months, but the $31.4 trillion limit on the national credit card isn’t going away. The United States is the only industrialized nation to have such an arbitrary institution as a debt ceiling, but the players who keep ending up in the same standoff aren’t exactly looking to kill it. House Republicans, led by newly elevated Speaker Kevin McCarthy, say they won’t move the debt ceiling without corresponding cuts in spending, something President Joe Biden and fellow Democrats insist is not on the table as part of these talks. House Republicans have just five votes to spare at the moment, while Democrats control the Senate and the White House. It’s a moment that seems to demand compromise, but that’s not in the offing, thanks in large part to McCarthy’s nakedly political concession to his hard-right flank that the House would leverage the debt ceiling to shrink the federal government. Democrats, who to this point have proved unified, say Republicans are trying to take the economy hostage to placate their performative right._ Description, summary, key points, chapters, key quotes, questions and transcript, where present, were produced automatically from the video or its captions and were not reviewed. ## Summary The video presents a White House press briefing exchange on the debt ceiling. A reporter asks what gives the administration confidence that a default can be avoided, and the briefer responds that the debt limit should be raised without conditions. The briefer cites the three bipartisan increases under the last administration and describes it as Congress's constitutional responsibility. The briefer also rejects the idea of Treasury prioritizing payments and refers to the full faith and credit of the country. ## Key points - The White House says the debt limit has been raised three times under the last administration in a bipartisan way. (00:12) - The briefer states the debt limit should be addressed without conditions and that the White House will not negotiate around it. (00:22) - The briefer calls addressing the debt ceiling the basic duty of Congress. (00:29) - The briefer says there is no alternative to Congress addressing the debt ceiling. (00:48) - Treasury makes millions of payments each day, and its system is built to pay the country's bills on time, not to make the United States delinquent. (00:48) - Treasury secretaries of both parties rejected as incredibly risky and dangerous the idea of paying bills selectively, which has never been tried before. (00:48) - The briefer describes dealing with the debt ceiling as Congress's constitutional responsibility. (01:17) - The briefer says precedent has been for both parties to come together and get the debt ceiling done, referencing the full faith and credit of the country. (01:36) ## Chapters - [00:00 to 00:12] Briefing opens with default question. A reporter asks what gives the White House confidence that a default can be avoided. - [00:12 to 00:48] No conditions, no negotiation on debt limit. The briefer says the debt limit should be raised without conditions, citing three bipartisan increases under the last administration. - [00:48 to 01:28] Congress's duty and Treasury's payment system. The briefer says Congress has a constitutional responsibility and that Treasury's system is built to pay bills on time. - [01:28 to 01:51] Republicans' view of responsibility and precedent. Asked about House Republicans, the briefer points to bipartisan precedent and the full faith and credit of the country. ## Key quotes - [00:22] White House briefer: "It is something that should be done without conditions." - [00:29] White House briefer: "It is the duty, the basic duty of Congress to get that done." - [00:48] White House briefer: "I'm going to say this is there is no alternative to Congress responsibility here to address the debt ceiling." - [01:17] White House briefer: "So it is essential for Congress to recognize that dealing with the debt ceiling is their constitutional responsibility." - [01:45] White House briefer: "We are talking about the full faith and credit of our country." ## Questions this video answers - Does the White House plan to negotiate with House Republicans over the debt limit? [00:22] - How many times was the debt limit raised under the last administration? [00:12] - Why does the White House say Congress must address the debt ceiling? [00:29] - Why does the White House reject having Treasury pay some bills and not others? [00:48] - Does the White House think House Republicans see their responsibilities on the debt ceiling the same way? [01:28] ## Content suitability - politics [00:00-01:51]: Political debate over the debt ceiling between the White House and House Republicans, including warnings about a potential default. - financial distress [00:04-01:51]: Discussion of the risk of a US default and the country's ability to pay its bills.  by [Mini Racker](https://time.com/author/mini-racker/)  ## Mini Racker Jan 17, 2023 9:57 PM UTC On Thursday, according to the Treasury Department, Washington is set to hit its limit on borrowing, meaning money already spent whose bills come due. Now, Treasury can take so-called extraordinary measures to kick the can down the road for a few months, but the $31.4 trillion limit on the national credit card isn’t going away. The United States is the only industrialized nation to have such an arbitrary institution as a debt ceiling, but the players who keep ending up in the same standoff aren’t exactly looking to kill it. House Republicans, led by newly elevated Speaker Kevin McCarthy, say they won’t move the debt ceiling without corresponding cuts in spending, something President Joe Biden and fellow Democrats insist is not on the table as part of these talks. House Republicans have just five votes to spare at the moment, while Democrats control the Senate and the White House. It’s a moment that seems to demand compromise, but that’s not in the offing, thanks in large part to McCarthy’s nakedly political concession to his hard-right flank that the House would leverage the debt ceiling to shrink the federal government. Democrats, who to this point have proved unified, say Republicans are trying to take the economy hostage to placate their performative right.  by [Mini Racker](https://time.com/author/mini-racker/)  ## Mini Racker Jan 17, 2023 9:57 PM UTC Less than two weeks after his chaotic ascent, Speaker of the House Kevin McCarthy is already facing down a [potential crisis](https://time.com/6247828/debt-ceiling-kevin-mccarthy-fight/). In a letter sent to McCarthy on Friday, Treasury Secretary Janet Yellen warned that the U.S. is expected to hit its $31.4 trillion debt limit on Thursday, January 19, and outlined a plan to delay the resulting default until the summer. It is the first such debt limit fight since Republicans took control of the House, and McCarthy has signaled that he plans to leverage the negotiations to secure deep spending cuts, which President Joe Biden and a Senate controlled by Democrats strongly oppose. Although Yellen appears to have bought lawmakers some time, hitting the limit would prevent the government from making the payments it has committed to and throw the global economy into a tailspin. If McCarthy is not able to wrangle his unruly conference and reach an agreement with Democrats to raise the debt ceiling in the coming months, millions of Americans are likely to face financial hardship. ## What is the debt ceiling? The debt ceiling is the amount of money the U.S. is allowed to borrow to pay for all of its commitments. The U.S. government borrows huge sums of money to cover its expenses. Congress created the debt ceiling decades ago to avoid the hassle of having to approve each new debt individually. Lawmakers have raised the debt ceiling dozens of times since then. Despite some of the political messaging around the debt ceiling, Congress is not authorizing new spending when it raises it. Instead, lawmakers are allowing the government to take on enough debt to fulfill the spending obligations it has already made. Those expenses include Social Security and Medicare benefits, tax refunds, salaries for government employees, veteran’s benefits, and interest on existing debt. ## What would happen if the U.S. defaulted on its debt? If lawmakers are unable to raise the debt limit in time, the U.S. would only be able to use incoming cash to pay its obligations, which would create a significant shortfall. Every program funded by the government would be at risk. “Anybody could pick their favorite program,” says Maya MacGuineas, the president of the bipartisan Committee for a Responsible Federal Budget. “Whether someone loves defense spending or food stamps or environmental research, there will be a pause on paying for all of those things.” Americans who aren’t directly dependent on government payments would also feel the effects if the U.S. defaults. In the past, even flirting with a default has caused economic turmoil. During a battle over the debt ceiling in 2011, the credit ratings agency Standard & Poor’s downgraded the United States’ top credit rating for the first time ever, with stock prices dropping significantly the next business day. The upcoming fight could go even farther, with The [_Washington Post_ reporting](https://www.washingtonpost.com/us-policy/2023/01/13/debt-ceiling-gop-plan/) that House Republicans are preparing a contingency plan for prioritizing payments if lawmakers don’t raise the debt limit in time. “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote in her letter. **Read more**: [_In Debt Ceiling Fight, Kevin McCarthy Can Either Crash the Economy or Blink_](https://time.com/6247828/debt-ceiling-kevin-mccarthy-fight/) The U.S. has never defaulted for failing to raise the debt limit in time, which means the consequences are unpredictable, but economists agree they would be dire. Were the U.S. to actually default, Treasury securities, widely considered to be among the most reliable investment**s** in the world, would no longer be regarded as such, leading investors to demand higher interest rates to loan money to the US government. Those rates would carry over to consumers preparing to take on mortgages, car loans, or credit card debt. Stock prices would likely plummet, causing retirement savings to evaporate. Those consequences would almost certainly trigger a recession. While many analysts were already predicting a recession this year as the Federal Reserve grapples with [record-high inflation](https://time.com/6227633/inflation-federal-reserve-interest-rates/), a recession set off by a U.S. default could be considerably more severe. ## When could the debt limit start affecting Americans’ wallets? Although Yellen wrote that the U.S. is expected to reach the debt limit on Thursday, the real crisis is likely some months away. That’s because she has invoked “extraordinary measures,” which will allow the Treasury to keep its debt below the limit while it waits for Congress to reach a more permanent solution. In recent years, Treasury secretaries have repeatedly used such measures, which involve temporarily suspending investments in certain retirement savings plans for government employees. Yellen herself used extraordinary measures in August 2021 to help the government avoid defaulting before President Biden signed a $2.5 trillion debt limit increase that December. In her letter to McCarthy, Yellen predicted that extraordinary measures would keep the government afloat at least until early June. But she also warned that the Treasury is only estimating exactly how long it can continue paying America’s debts. “The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future,” Yellen wrote. Barring an unprecedented workaround, Congress will have to vote soon to either suspend or increase the debt limit. With Republicans now in control of the House, that will be easier said than done. As part of the [deal that allowed McCarthy to secure enough votes to become Speaker of the House this month](https://time.com/6245390/mccarthy-elected-house-speaker-kitchen-sink/), some right-wing lawmakers have demanded any increase in the debt limit come with deep spending cuts. Others hope to use the issue, a rare must-do item on the legislative agenda, as a bargaining chip to enact conservative policies. McCarthy said Tuesday he hoped to begin negotiations with other leaders and the president as soon as possible. But congressional Democrats and the White House say they will insist on a no-strings-attached debt limit increase. “This is not political gamesmanship,” Karine Jean-Pierre, the White House press secretary, told reporters on Friday. “This should be done without conditions. And that’s how we see this process moving forward.” As it has in the past, a protracted stalemate could hurt the economy in the lead up to the debt ceiling deadline, even if lawmakers eventually reach an agreement. With both sides digging in their heels, the stage is set for another drawn-out congressional standoff in the months to come. “I’ve seen very few deals that are difficult that Congress has done in advance of when they need to,” MacGuineas says. “I think nobody’s going to want to compromise until they feel that they have no other choice but to do so. Instead, I think we will do this at the last minute possible with all sides acting as though they’re unwilling to compromise, which is the very crux of governing.” ```json [{"@context":"https://schema.org","@type":"NewsArticle","@id":"https://time.com/6247877/what-is-debt-ceiling-congress/","mainEntityOfPage":{"@type":"WebPage","@id":"https://time.com/6247877/what-is-debt-ceiling-congress/"},"headline":"Why the Debt Ceiling Matters and What Happens if Congress Refuses to Raise It","datePublished":"2023-01-17T21:57:43.000Z","dateModified":"2026-10-19T07:06:22.046Z","description":"Congress is not authorizing new spending when it votes to raise the debt ceiling. 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Now, Treasury can take so-called extraordinary measures to kick the can down the road for a few months, but the $31.4 trillion limit on the national credit card isn’t going away. The United States is the only industrialized nation to have such an arbitrary institution as a debt ceiling, but the players who keep ending up in the same standoff aren’t exactly looking to kill it. House Republicans, led by newly elevated Speaker Kevin McCarthy, say they won’t move the debt ceiling without corresponding cuts in spending, something President Joe Biden and fellow Democrats insist is not on the table as part of these talks. House Republicans have just five votes to spare at the moment, while Democrats control the Senate and the White House. It’s a moment that seems to demand compromise, but that’s not in the offing, thanks in large part to McCarthy’s nakedly political concession to his hard-right flank that the House would leverage the debt ceiling to shrink the federal government. 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