What is the debt ceiling?
Washington regularly sets a limit on federal borrowing. Currently,the ceiling is set at $US31.4 trillion ($47.1 trillion),equal to roughly 120 per cent of the country’s annual economic output. The debt reached that ceiling in January and the Treasury Department has kept obligations just within the limit by suspending investments in some federal pension funds while continuing to borrow from investors.
The Treasury warned last week that it could have to stop borrowing altogether and rely solely on tax receipts to pay its bills by as soon as June 1,though it also said that cut-off,known as the “X-date” could occur several weeks later.
Because the Treasury borrows close to 20 cents for every dollar it spends,Washington at that point would start missing payments owed to lenders,citizens or both.
Is the debt ceiling good for anything?
Few counties in the world have debt ceiling laws and Washington’s periodic lifting of the borrowing limit merely allows it to pay for spending Congress has already authorised.
Treasury Secretary Janet Yellen and other policy experts have called on Washington to eliminate the limit because it amounts to a bureaucratic stamp on decisions already made.