The federal fiscal year ends this week, and the debt ceiling will need to be raised. So, what is the debt ceiling? The debt ceiling is a legal limit on how much outstanding debt the federal government can hold. Every year it must be raised by Congress for the Treasury Department to continue to spend and meet its legal obligations. This is a particularly American issue. The United States is one of only a few countries that has a hard legal limit on debt.
Congress acting on the debt limit has been a necessary part of governance that has occurred many times going back to at least the 1960s. It has always been a partisan issue but since 2011, it has become an even more contentious issue. Congress has used the raising of the debt ceiling to debate fiscal policy and delay the process. Not raising the limit can lead to a federal government shutdown, which has occurred a few times in the last decade. It could also lead to the federal government defaulting which economists say would cause a recession. Some have advocated for eliminating the debt limit through a variety of means which would end this annual dilemma.
CRS Report: The Debt Limit in 2021
Federal Debt and the Statutory Limit