The United States federal government is on track to reach the debt ceiling sometime between June 5th and the end of September.
The United States federal government makes money through taxes. So far in 2023 (through March 31, 2023) this is how the government has made its income (revenue):
The Federal income (revenue) has increased from $4.05 T in 2015 to $4.90 T in 2022.
The United States Federal Government spends money on things like national defense, healthcare, education, and social services. However, sometimes (more like ALWAYS) the government spends more money than it makes, and this leads to something called the federal debt.
The federal debt is basically the total amount of money that the government has borrowed over the years to cover its expenses. To keep the government running, the US Government borrows money by issuing bonds and other types of debt instruments.
Now, the debt ceiling is a legal limit on the amount of debt that the US government can have outstanding at any given time. This means that Congress sets a limit on how much money the government can borrow to pay its bills.
Here is the Debt Ceiling since 1981. This is often a political issue because neither major party wants to be viewed as the party causing a government shutdown while both parties would like to use the opportunity to negotiate on incentives and budgets.
When the government gets close to hitting this limit, Congress must vote to raise the debt ceiling. If the debt ceiling is not raised, the government will be unable to borrow more money and it will have to start cutting back on its spending.
If the government is unable to borrow more money and must start cutting back on its spending, this can lead to something called a government shutdown. A government shutdown is when the government must stop providing some services and programs because it doesn't have enough money to pay for them.
Government Shutdowns can cause government employees to lose jobs. It may halt businesses from being able to apply for licenses or approvals. It can cause national parks to stop operating. The effects of a shutdown can extend across the entire economy.
On August 5, 2011, S&P announced that they downgraded US Government debt one notch to AA+ for the first time ever. This downgrade was a result of a near government shutdown. It caused market volatility in both bond and stock markets.
The solution to prevent or fix a government shutdown is for congress to raise the debt ceiling. The other options would be to increase revenue (tax more) or cut spending; however that never happens because people would lose jobs and certain areas of the government would not reopen.
Here are the government shutdowns that have occurred since 1980.
The debt ceiling is a limit on how much money the government can borrow to pay its bills, and if Congress doesn't raise the debt ceiling, it can lead to a government shutdown.
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