What Is the Debt Ceiling and Why Does It Matter?

Buchalter & Pelphrey

There’s been a lot of talk about the debt ceiling, but what is it exactly, and why does it matter?

The Debt Ceiling

National Debt

To understand the debt ceiling, it’s important to understand the national debt. The U.S. Federal government borrows money and accumulates debt over time. When added up, these debts make up the national debt.

Like any other borrower, the United States will take out a loan or borrow money from another country to bridge the gap for infrastructure, military spending, trade, or global commerce deals. However, the national debt is different from the debt you may owe because the Treasury Department creates and sells securities to make ends meet.

These securities may be bonds, bills, or notes which the American people can purchase to help pay off the national debt. Bonds are secure investments with little to no risk and even less reward over time compared to other investment options.

Without sufficient revenue from bonds to help pay off what the country owes, the national debt may reach the debt limit or ceiling, a set amount of debt the U.S. Federal government can have. Currently, the debt limit is $28.4 trillion.

Changing the Debt Ceiling

The government can raise the debt ceiling when the country reaches the limit. This isn’t a decision to be made lightly, and it can have serious implications for America’s financial future. However, it is important to understand that sometimes there are no better options.

After the housing market crash in 2008, the government raised the debt ceiling to help the markets bounce back. This not only helped to relieve some of the pressure on the Treasury, but it also gave them the opportunity to borrow more money to bail out housing giants like Fannie Mae and Freddie Mac.


The government attempts to raise the debt ceiling to account for market freefall during the pandemic and the fallout from months-long lockdowns. At this point, the debt ceiling isn’t the problem – Congress is taking a long time to vote.

To make changes to the national debt and the debt ceiling, Congress has to vote majority in favor. Voting is a long, complicated process, but shortcuts are sometimes allowed in a crisis. What worries many economists is how the impasse in Congress will affect the economy. Some economists expect increases in unemployment, increased inflation, and a declining stock market.

So, what does this mean for you?

Why National Debt Matters

In general, the Federal government has little bearing on day-to-day life, but the economy is something we interact with every day. When you buy groceries, you’re contributing to commerce, and you may experience inflation.

Not only does the economy affect our daily lives, but time is money, and further delays on budgetary matters could negatively affect the financial conditions we need to survive. Federal workers are usually the first to feel these changes, and if the impasse continues, their paychecks could be frozen indefinitely.

What You Can Do

The economy is in a fragile state, so any significant delays or shifts in the markets could drastically change things in a short period of time. These are serious concerns, but that doesn’t mean there aren’t ways to take control of your finances now.

If you are already struggling financially and worry about how government shutdowns, delayed congressional votes, and the national debt could affect you, speak to an attorney. Many Americans face financial hardship, but bankruptcy or debt consolidation can give you the peace of mind you need.

Contact Buchalter & Pelphrey Attorneys At Law to find out how you can stabilize your financial future today.
Let our family help yours.

Related Posts
  • Why Do Global Crises Affect the Economy? Read More
  • What is Skimpflation? Read More
  • Build Back Better Could Improve Your Life Read More