Key Takeaways
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The U.S. government's borrowing limit was reimposed this week, putting the nation days away from going over the debt ceiling.
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The Treasury Department will be able to use accounting tricks to keep the government paying its bills until the summer, according to one analysis.
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When the extraordinary measures run out, lawmakers will have to pass a debt ceiling extension or suspend it, or else the government may not be able to pay everyone it owes money to, setting off a financial crisis.
A key deadline for the government's borrowing limit has passed, but lawmakers may not have to deal with it until the summer.
The nation's debt limit came back into effect Thursday, re-imposing a congressionally set cap on the amount of money the government is allowed to borrow. The limit had been suspended in 2023 in a bargain between President Joe Biden and Republican lawmakers. However, the borrowing limit is unlikely to seriously affect the nation's finances or the economy for months to come, according to at least one analysis.
The government going over the borrowing limit could have heavy economic consequences. If the government is no longer able to borrow money, officials would have to pick and choose which of its obligations it would fulfill with the revenue it brings in. For example, lawmakers would have to choose between paying interest on the national debt or sending checks to Social Security recipients.
Those choices could potentially set off a global financial crisis and tank the economy. In recent years, lawmakers have used breaching the debt limit as a negotiating tool, winning concessions from their opponents in exchange for not letting the country go over that financial cliff.
The Government Has Some Wiggle Room
Although the debt ceiling is now back in effect, it could be days before the U.S. hits its congressionally mandated debt level and months after that before Congress would be forced to act to extend it.
By law, the new limit was set at the current level of the national debt, around $36 trillion. With the debt generally rising over time due to government spending deficits, it is bound to hit the ceiling sooner or later.
However, in a letter to Congress last week, Treasury Secretary Janet Yellen explained that a pre-scheduled sale of some securities the government held gave it a few days of wiggle room, projecting the ceiling would be reached sometime between Jan. 14 and Jan. 23.
The Real Deadline Is This Summer
After that, the Treasury Department can use accounting tricks called "extraordinary measures" to keep the government paying its bills for a time. The measures will likely work until the summer, Bernard Yaros, lead U.S. economist at Oxford Economics, wrote in a commentary this week.
At that point, it would be up to President Trump and Congress to raise or suspend the debt limit.