Explaining the debt ceiling and the Trump administration’s plans

Alex Wong/Getty Images(WASHINGTON) — While President Donald Trump has spent much of his first six months in office attempting to roll back many of the actions instituted by his predecessor, on at least one issue, the Trump administration is echoing a stance taken by their forerunners.

With less than two months until Sept. 29, the date the Department of Treasury anticipates it will no longer be able to pay the government’s bills, the White House is asking Congress to raise the debt ceiling, despite Trump’s criticism of Obama’s similar requests in years past.

“To ensure that we have robust economic growth and promote fiscal discipline, the Trump administration believes it’s important to raise the debt ceiling as soon as possible,” White House press secretary Sarah Sanders said on Tuesday.

Here’s what you need to know about the cap on government borrowing:

What is the debt ceiling?

The debt ceiling is the maximum amount of money the federal government can borrow, a value determined by members of Congress.

The Treasury Department is responsible for issuing money for federal programs and agencies, such as Social Security checks or Medicaid funding, and so the debt ceiling offers the Treasury more flexibility to pay these bills. Sometimes referred to as the “debt limit,” the debt ceiling has been increased over time since its initial creation during World War I.


Prior to the debt ceiling’s creation, the president had full control over the management of the country’s finances. Congress could freely decide how to spend and borrow money, though at the time the economy was less complex.

In 1917, the Second Liberty Bond Act introduced the limit on federal debt. These restrictions were altered and increased, and in 1939, Congress initiated the first aggregate debt limit. This number was raised numerous times without controversy between 1939 and 1953, when the Senate leveraged the debt for the first time to try to restrict President Dwight Eisenhower’s spending on the national highway system.

Since then, the debt ceiling has often been used as a bargaining chip between Congress and the president, particularly during former president Barack Obama’s administration. In 2015, Obama warned Congress during a press conference that if the “debt ceiling” gets messed up, it would impact the global economy significantly and “put the the financial system in tailspin” a month before negotiations for it began.

Current debt ceiling

The current debt ceiling was reset on March 16 to add the amount of borrowing accumulated during the debt suspension limit. This raise was in accordance with the Bipartisan Budget Act of 2015, and effectively moved the debt ceiling value from $18.113 trillion to $19.809 trillion. Of this final value, $14.3 trillion was debt held by the public while $5.5 trillion was attributed to private holdings.

What happens if the ceiling is not raised?

According to the Department of the Treasury, Congress has raised, extended or revised the debt ceiling 78 times since 1960. Not increasing the debt “would cause the government to default on its legal obligations,” which “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,” according to the Treasury.

The Congressional Budget Office estimated in June 2017 that if the current ceiling is not raised, the Treasury will no longer be able to pay its obligations by mid-October.

The Treasury has been utilizing pension funds to avoid creating new debt, which is considered an extraordinary measure. Extraordinary measures will not be able to keep the debt from rising after early September, at which point the Treasury can use incoming tax receipts to last until early in October. However, if Congress does not raise the ceiling by this point, the federal government will run out of money, and may shut down as in 2013.

What the Trump administration wants to do

In 2011, Trump tweeted about the debt ceiling, writing that then-President Barack Obama was “destroying our country” by trying to raise the debt limit.

He is destroying our country:@BarackObama has requested to raise our debt limit to over $16.4Trillion by the end (cont) http://t.co/A5DGJvhP

— Donald J. Trump (@realDonaldTrump) December 28, 2011

Trump continued to tweet about the debt in 2012, when he posted “Republicans remember–debt ceiling, debt ceiling, debt ceiling–be smart and you will win!

Republicans remember—debt ceiling, debt ceiling, debt ceiling—be smart and you will win!

— Donald J. Trump (@realDonaldTrump) December 27, 2012

Trump then tweeted “I cannot believe the Republicans are extending the debt ceiling–I am a Republican & I am embarrassed!” in 2013.

I cannot believe the Republicans are extending the debt ceiling—I am a Republican & I am embarrassed!

— Donald J. Trump (@realDonaldTrump) January 23, 2013

In March, Treasury Secretary Steve Mnuchin wrote in a letter to both Republican and Democratic congressional leaders that “honoring the full faith and credit of our outstanding debt is a critical commitment.”

“I encourage Congress to raise the debt limit at the first opportunity so that we can proceed with our joint priorities,” he continued.

In a hearing on May 24, Mnuchin told the House Ways and Means Committee that he believes it is “absolutely important that this is passed before the August recess, and the sooner the better.”

In contrast, Office of Management and Budget Director Mick Mulvaney has advocated for concessions such as spending cuts in new bills that would raise the debt ceiling.

Before Sanders’ comments Tuesday, Trump appeared to have endorsed Mnuchin’s approach, telling Republican congressional leaders that “Mnuchin is that guy” for debt-ceiling negotiation in early June.

Ahead of hearings to discuss the state of the debt ceiling in 2017, Rep. Mark Meadows, R-North Carolina, said he felt that Congress “would raise the debt ceiling” and that there “shouldn’t be any fear of that” during an event today at the Newseum.

However, Meadows said he didn’t see point of having a “clean debt ceiling” when it has “never been done under a Democrat president in the White House before.” “Why should we do one when we have a Republican there? … I’m one that I’m probably not as bullish on the debt ceiling just because I don’t believe that we should play around with the full faith and credit of our country … I’m bullish on getting it done.”
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