When the 2008 Great Recession started, the government had to bulk up spending to bail out banks and increase social services as the unemployment rate hit 10%. George W Bush cut taxes twice, in 20, and then the US military campaigns in Iraq and Afghanistan increased spending by as much as nearly $6tn over the course of the war. But then, in the early 2000s, the dotcom bubble burst, leading to a recession. Without as much tax revenue, the government needed to borrow more money to spend.ĭuring the 90s, the end of the cold war allowed the government to cut back on defense spending, and a booming economy led to higher tax revenues. But the debt really started to grow in the 80s, after Ronald Reagan’s huge tax cuts. Throughout its history, the US has had at least some amount of debt. At times, the ceiling was briefly suspended and then reinstated at a higher limit, essentially a retroactive raising of the debt ceiling.Īrea chart of the total US government debt increasing over time The debt ceiling has been raised 78 times since 1960, under both Democrat and Republican presidents. Once the US government hits its debt limit, the treasury cannot issue more securities, essentially stopping a key flow of money into the federal government.Ĭongress is in charge of setting the debt limit, which currently stands at $31.4tn. To borrow money, the US treasury issues securities, like US government bonds, that it will eventually pay back with interest. The deficit left at the end of the year ultimately gets tacked on to the country’s total debt. This leaves the government with a deficit, which has ranged from $400bn to $3tn each year over the last decade. The debt ceiling is the limit on the amount of money the US government can borrow to pay for services, such as social security, Medicare and the military.Įach year, the government takes in revenue from taxes and other streams, such as customs duties, but ultimately spends more than it takes in. As details of the deal begin to come to light, here is a quick guide on the debt ceiling and what it means for the US government and people across the country: What is the debt ceiling?
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