by Lance Knaack CFP® Associate Financial Planner |
November 23, 2021
What is the debt ceiling and why do we have it? According to USAFacts.org, the debt ceiling is a restriction on how much the government can borrow to pay its bills.
During the first 150 years or so of our government, the government evaluated taking on debt on a case-by-case basis. As government grew, this became more difficult to manage. The initial debt ceiling began around 1939 at $45 billion.
The debt ceiling has been raised by Congress roughly 100 times since 1939 with 17 of those being raised since 2001. If the debt ceiling does not get raised, the US could default on some of its outstanding debt and its credit rating could go down.
Unfortunately, unless the government gets spending under control or raises taxes to bring in revenue, this will probably come up in the news cycle as an issue every few years. When it does, it can cause volatility in the stock markets but it is generally short term with no lasting impacts.
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