What is the debt ceiling? The US government debt ceiling explained in 60 seconds

What is the debt ceiling, and how would a default affect you?

The debt ceiling controls the amount of money the U.S. government can borrow.

Congress sets the limit, which is now 16 trillion dollars.

Here's the problem, just about every year congress authorizes spending beyond the taxes it will take in.

That means the U.S. government has to borrow and that's a big problem.

The government needs to borrow, but we're at the debt ceiling limit so it can't borrow.

That means government spending has to be cut to the point where spending equals tax revenue.

Such a big decline in government spending could mean a recession.

It would be worse if the administration can't make payments on the interest on the debt.

That means a default.

The most secure debt in the world, U.S. government debt, would suddenly be deemed as risky .

Interest rates for U.S. government borrowing would rise sharply.

Along with it rates on home, auto and credit card loans could surge.

Or congress could agree to raise the debt ceiling and none of that would happen.


Comments