Omar Bennett
The constitutional limit on public debt, also known as the debt ceiling, is the maximum amount of money that a government is legally allowed to borrow. In the United States, the debt ceiling is set by the federal government and restricts the total amount of money the government can borrow to meet its existing legal obligations. The validity of the public debt of the United States is enshrined in the Fourteenth Amendment, which states that it shall not be questioned. However, the debt ceiling has been a subject of debate, with some scholars and politicians arguing that it is unconstitutional as it contradicts the Public Debt Clause. The implications of reaching the debt ceiling and the potential for a default on public debt have been a source of concern, with some arguing that it could lead to catastrophic economic consequences.
| Characteristics | Values |
|---|---|
| What is the debt limit? | The total amount of money that the US federal government is authorized to borrow to meet its existing legal obligations. |
| Does it authorize new spending commitments? | No, it allows the government to finance existing legal obligations. |
| What happens if the debt limit is not increased? | It would cause the government to default on its legal obligations, which would have catastrophic economic consequences. |
| How often has Congress acted to raise the debt limit? | Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit. |
| What is the debt ceiling? | A law that limits the total amount of money the federal government can borrow. |
| Does the debt ceiling directly limit the size of the budget deficit? | No, it limits the amount the Treasury can borrow to pay this already-authorized spending. |
| What is the National Debt? | The amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. |
| What is the debt limit in New York State? | The debt limit is a percentage of the current full valuation of taxable property within a municipality. |
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What You'll Learn
The US debt ceiling and its constitutionality
The US debt ceiling is a law that limits the total amount of money the federal government can borrow to meet its existing legal obligations. These include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorise new spending commitments but allows the government to finance existing legal obligations.
The US has carried debt since its inception. Debts incurred during the American Revolutionary War amounted to $75 million, borrowed mainly from domestic investors and the French government for war materials. The national debt enables the federal government to pay for important programs and services for the American public. The federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone.
Many scholars argue that the debt ceiling law is unconstitutional, pointing to Section Four of the 14th Amendment of the US Constitution, which states that "the validity of the public debt of the United States... shall not be questioned". They argue that it was unconstitutional for the US Congress to pass the debt ceiling law in the first place, as the law does not provide a clear way for the US to pay its debts and implicitly requires a default. This argument has been endorsed by various politicians, including President Bill Clinton, former labour secretary Robert Reich, and Representatives Jerry Nadler and James Clyburn.
In practice, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling. Obama said in 2011 that his lawyers "were not persuaded that that is a winning argument". In 2023, Biden's Treasury Secretary Janet Yellen called this strategy "legally questionable". Biden himself suggested that he would explore the question in the future but questioned the practicality of relying on this approach to defuse a debt ceiling standoff.
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The Public Debt Clause and government obligations
The United States debt ceiling, or debt limit, is a law that restricts the total amount of money the federal government can borrow to meet its existing legal obligations. These obligations include Social Security and Medicare benefits, military salaries, interest on the national debt, and tax refunds. The debt limit does not authorise new spending commitments but allows the government to finance existing commitments made by previous Congresses and presidents.
The Public Debt Clause, or Section Four of the Fourteenth Amendment, states that "the validity of the public debt of the United States, authorized by law...shall not be questioned". This clause was inspired by the desire to ensure the obligations of the government issued during the Civil War were met, but it has broader connotations. Some scholars argue that the debt ceiling law is unconstitutional because it does not provide a clear way for the government to pay its debts and could lead to a default. They argue that the Public Debt Clause is violated when government actions create substantial doubt about the validity of the public debt, even if there is no actual default.
However, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling. In practice, Congress has always acted to raise, temporarily extend, or revise the debt limit when necessary, and the Treasury has never reached the point of exhausting extraordinary measures and defaulting on its obligations.
Failing to increase the debt limit would likely have catastrophic economic consequences, causing the government to default on its legal obligations for the first time in American history. This would precipitate another financial crisis and threaten the jobs and savings of everyday Americans.
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The economic consequences of a debt limit
The United States debt ceiling, or debt limit, is a law that restricts the total amount of money the federal government can borrow. This limit does not authorize new spending commitments but allows the government to finance existing legal obligations. These include Social Security and Medicare benefits, military salaries, interest on the national debt, and tax refunds.
Debt ceiling law has been a subject of debate, with many scholars arguing that it is unconstitutional. They point to Section Four of the 14th Amendment of the United States Constitution, which states that "the validity of the public debt of the United States...shall not be questioned." Legal scholars and politicians, including President Bill Clinton and former Labor Secretary Robert Reich, argue that it was unconstitutional for the US Congress to pass the debt ceiling law, as it does not provide a clear way for the country to pay its debts. However, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on these legal arguments, with Biden suggesting that he would explore the question further in the future.
The debt limit does not directly control the size of the budget deficit but restricts the amount the Treasury can borrow to pay for already-authorized spending. When the limit is reached, the Treasury must resort to "extraordinary measures" to temporarily finance government expenditures until a resolution is found. Congress has acted 78 times since 1960 to permanently raise, temporarily extend, or revise the debt limit.
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The debt limit and Congress
The debt limit, also known as the debt ceiling, is the total amount of money that the US federal government is authorised to borrow to meet its existing legal obligations. This includes Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorise new spending commitments but allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents. Congressional leaders in both parties have recognised the necessity of this. For example, in 2011, Congress raised the debt limit with the Budget Control Act, which added to the fiscal cliff when the new ceiling was reached on December 31, 2012.
Failing to increase the debt limit would likely have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans, putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession.
Many scholars argue that the debt ceiling law is unconstitutional, pointing to Section Four of the 14th Amendment of the US Constitution, which states that "the validity of the public debt of the United States...shall not be questioned". They argue that it was unconstitutional for Congress to pass the debt ceiling law in the first place, as the law does not provide a clear way for the US to pay its debts and implicitly requires a default. However, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling.
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Local government debt limits
The US debt ceiling is a law that limits the total amount of money the federal government can borrow. The debt ceiling does not authorize new spending commitments. It allows the government to finance existing legal obligations, such as Social Security and Medicare benefits, military salaries, interest on the national debt, and tax refunds. The national debt does not include debts carried by state and local governments, such as debt used to pay for state-funded programs.
In the US, the federal government has run a budget deficit annually since 2002, requiring it to borrow funds to finance authorized spending in the federal budget. The debt ceiling does not directly limit the size of the budget deficit but restricts the amount the US Treasury can borrow to pay for this spending. Once the debt ceiling is reached, the government loses the ability to pay bills and fund programs and services.
While the US Constitution does not specify a constitutional limit on public debt, Section Four of the Fourteenth Amendment states that "the validity of the public debt of the United States...shall not be questioned." Many scholars argue that the debt ceiling law is unconstitutional, as there is no legal basis for the government to default on its debt. However, the administrations of Presidents Barack Obama and Joe Biden have rejected relying on legal arguments against the constitutionality of the debt ceiling.
At the state level, there are varying limits on local government debt. For example, in New York State, the debt limit for local governments and school districts is based on a percentage of the five-year average full valuation of taxable property within a municipality. Certain types of debt, such as those related to water supply and distribution and short-term borrowings, are excluded from the limit.
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Frequently asked questions
The constitutional limit on public debt, also known as the debt ceiling, is the total amount of money that the US federal government is authorised to borrow to meet its existing legal obligations.
These include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.
If the debt ceiling is not raised, the government would default on its legal obligations, which would have catastrophic economic consequences.
Extraordinary measures are actions taken by the Treasury, authorised by Congress, to temporarily finance government expenditures and obligations when the debt ceiling is reached.
Many scholars argue that the debt ceiling law is unconstitutional, pointing to the Fourteenth Amendment, which states that "the validity of the public debt of the United States...shall not be questioned".
![To provide for a responsible increase to the debt ceiling.: [Debt Limit Text 2023]](https://m.media-amazon.com/images/I/61oIHXGddEL._AC_UL320_.jpg)
