What’s up with the debt ceiling?

In January, the United States once again ran up against its debt limit—the federal government’s borrowing cap, set in law by Congress. The current cap is $31.4 trillion, up from $16.4 trillion in 2011. Sometime before summer, the United States will need to increase, suspend, or completely remove the debt limit before risking a national default, according to the Treasury Department.

How does the government get into debt in the first place? When government expenditures exceed national revenue, the U.S. Treasury makes up the difference through the sale of government bonds, notes, bills, and Treasury-protected securities. Those sales incur debt. Raising the debt limit isn’t used to make new expenditures but rather to pay off ones already made.

What’s a “default”? When the Treasury can no longer pay its obligations, it will “default” on its debt—in the same way a private individual might default on a house payment or a loan. Treasury Secretary Janet Yellen has said that defaulting on the United States’ debt would be disastrous for the economy. By shaking confidence in the country’s ability to make long-­standing financial commitments, a default would almost certainly spark a recession. The Treasury Department is continuing to make the country’s payments through what it describes as “extraordinary measures.” These tactics, which strategically move funds from one government department to another and delay payments, can keep the country’s budget afloat until June or July.

How do we raise the debt limit? Congress can do so, but Republican lawmakers, who currently control the House of Representatives, oppose raising the debt ceiling without first making cuts to the budget. House Republicans argue the government needs to address the cause of spiraling debt: failure to live within its means. Last year, government spending outpaced revenue by $1.4 trillion. The White House has said it won’t negotiate spending cuts without first raising the debt ceiling. House Speaker Kevin McCarthy, R-Calif., has said he won’t raise the ceiling without spending cuts, although he says he won’t cut Social Security.

How far can the U.S. raise the limit? No one really knows how much money the U.S. can afford to borrow before it affects the country’s economic vitality. Economists worry about the ballooning interest the U.S. pays on its debt. According to the Congressional Budget Office, the United States is estimated to pay $640 billion in interest this fiscal year—roughly $5,000 per household. On its current trajectory, the country could reach $1.4 trillion in annual interest payments by 2033.