To recap, the debt limit, often referred to as the ‘debt ceiling’ (a term we are going to be hearing a lot more of in the coming months), is the maximum amount of debt that the Department of the Treasury can issue to the public or to other federal agencies.
On December 16, 2021, lawmakers raised the US debt limit by $2.25 trillion to a total of $31.4 trillion. That limit was reached on January 19, 2023, triggering an announcement by the Treasury of a ‘debt issuance suspension period’, during which it can take ‘extraordinary measures’ to borrow additional funds without breaching the debt ceiling.
Put another way, the Treasury has engaged in accounting gymnastics to remain a going concern and avoid a devastating federal payments default that would have far-reaching repercussions for the global economy and financial markets.
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