General Financial Literacy: Understanding the United States Debt Ceiling

Imagine you want to buy a computer for $100, but it turns out you only have $50. To make up the difference, you borrow $50 from a friend. Now, you are in debt. As of 2024, the United States Federal Government owes $35.46 trillion in debt.

This raises the question: Who controls how much debt the country can have?

The answer is: Congress

The term “debt ceiling” or “debt limit” is a restriction set by Congress on how much debt the federal government can accumulate. This limit restricts the amount that the Treasury, which handles the government’s finances, can borrow to pay the bills. These expenses can include Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.Once the debt ceiling is reached, the federal government can’t take on more debt. This means losing the ability to pay bills and fund programs and services. However, the Treasury can use special measures approved by Congress to temporarily pause certaininternal debts. This allows the government to keep borrowing money for a short time to cover its expenses.

Knowing about the debt ceiling helps us understand how the government pays for things like schools, roads, and healthcare. When the government hits the debt limit, it can’t borrow more money, which can lead to delays in paying for important programs. Even though this might seem like something only adults need to worry about, it actually affects everyone. If the government can’t pay its bills on time, it could impact jobs, prices, and even the money available for things that help our communities.

Learning how the debt ceiling works is a good first step toward understanding how money decisions are made — not just by the government, but also in your own life. Being smart with money, planning ahead, and knowing where money goes are skills that matter at every level.

“Debt Limit.” U.S. Department of the Treasury, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit?utm_source=chatgpt.com. Accessed 1 January 2025.

“Understanding the National Debt | U.S. Treasury Fiscal Data.” Fiscal Data, https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/#the-growing-national-debt. Accessed 1 January 2025.

Hutzler, A. (2023, May 18). How US national debt grew to its $31.4 trillion high. ABC News. https://abcnews.go.com/Politics/us-national-debt-grew-314-trillion-high/story?id=99429867