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Understanding the Debt Ceiling - Valley News Live - KVLY/KXJB - Fargo/Grand Forks

Understanding the Debt Ceiling

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Understanding the Debt Ceiling

The debt ceiling, also known as the debt limit, is the total amount of money the United States government is approved to borrow to pay its obligations such as Social Security, Medicare benefits, military salaries, interest on national debt, tax refunds and other payments.

The treasury department makes the payments and uses money that the government collects in taxes to pay most of the bills. When the government falls short, it then borrows some to make up the difference. The debt ceiling does not authorize any new spending commitments, it purely allows the government to compensate its legal obligations.

If Congress fails to raise the debt ceiling from $16 trillion it would have economic consequences according to the Treasury Department. It would cause the government to default and would be an unprecedented event in American history.

The Treasury Department projects it will be out of borrowing authority on October 17, 2013. By that time they will have about $30 billion left on hand.

Since 1960 Congress has acted 78 separate times to raise, temporarily extend, or revise the definition of the debt limit.

A government shutdown does differ from a default. In a shutdown the government temporarily stops paying employees who perform government services. In a default the government is unable to pay on time to its citizens and creditors.

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