In his 2023 State of the Union address, President Biden urged Congress to raise the debt ceiling. As lawmakers debate government spending and borrowing, CatholicVote brings you this simple explainer:
As with any household, the United States federal government has income and expenses. The income comes from our taxes, which have steadily increased throughout American history.
So has spending. In fact, since World War I Congress has spent more than it makes. It cannot pay for its operations out of the revenue it makes from taxes. In order to fund government programs, the United States has been borrowing money from other countries.
When you owe money, that’s called “debt,” and as with credit card debt or a mortgage, the American people pay interest on the money we owe.
The “debt ceiling,” then, is the legal limit on the amount of money Congress can borrow to pay for its programs. That limit started at $45 billion in 1939 – the dawn of World War II – and now sits at $31.381 trillion.
Both Republican and Democratic majorities have historically voted to raise the ceiling in order to avoid defaulting.
Once the federal government hits the legal limit of debt, there are “extraordinary measures” the Treasury can take to avoid defaulting on the loans. But once those are exhausted, the government can take on no more debt and soon runs out of cash.
Incoming money from taxes does not cover the cost of federal programs, and the government will not be able to meet its obligations when payment comes due.
In 2012, a Treasury Inspector General report noted that the least harmful scenario in this case would be to suspend all government payments – including social security, salaries for federal civilian employees, and veterans’ benefits, among others.
Instead, Congress has voted to continue to raise the debt ceiling and take on more debt in order to continue to fund its spending.
According to a 2023 Moody’s Analytics report, the United States Treasury “will not have the cash to pay all its bills on time later this year” unless Congress increases, suspends, or eliminates the debt ceiling.
As of January 19, 2023, the Treasury was forced to take extraordinary measures to avoid defaulting on its promises. Moody’s predicts that the Treasury will default as early as June 2023 and no later than October this year. Both sides of the political aisle agree: this would be disastrous.
The short-term solution is to simply raise the debt ceiling again. In his State of the Union address, President Biden advocated for this option, urging Congress to “protect the full faith and credit of the United States.”
If Congress continues to vote to raise the debt limit, taking on more debt at current rates, experts estimate that the U.S. debt will top $89 trillion in 2029. At that point, interest payments will constitute 15% of the federal budget.
Experts suggest that at some point, Congress must adopt long-term solutions. Eventually interest rates will rise and eat up more of the monthly federal budget. This will be a heavy burden on future generations of Americans, whose taxes will have to meet those increases.
According to a 2020 report from the Congressional Budget Office, long-term solutions would necessarily include a return to responsible spending. The federal budget should
Catholic leaders in the modern era have said very little about international debt and the fiscal responsibilities of governments. In Light of the World, however, Pope Benedict XVI identified high levels of both individual and national debt with a grave moral disorder.
The willingness of nations to take on massive debt demonstrates a “practical atheism” that lives “at the expense of future generations,” he wrote. This is a moral failure to practice solidarity with our posterity, Benedict stated: “We live on the basis of appearances, and the huge debts are meanwhile treated as something that we are simply entitled to.”
His warnings, grounded in the social teaching of the Catholic Church, should inspire American lawmakers as they confront the current debt ceiling and consider solutions.