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Playing Fast and Loose With the Debt Limit

by Jonathan Masters
December 6, 2012

The United States Treasury building, Washington, DC (Courtesy Flickr). The United States Treasury building, Washington, DC (Courtesy Flickr).


It’s still uncertain whether the White House and Congress can cobble together a compromise that would avert the “fiscal cliff” at year’s end. Indeed, some speculate that Washington’s proverbial gridlock will take the nation over the edge, jolting a still fragile economic recovery—if only temporarily.

However, one looming deadline the government simply cannot afford to miss is the date when Treasury hits its capacity to borrow, known as the statutory debt limit, which officials estimate will come in late January or early February. The nation has never failed to raise the debt ceiling in a timely fashion, for doing so would risk a default on U.S. financial obligations and possibly tarnish the full faith and credit of the United States in the eyes of global investors.

This Renewing America backgrounder examines the federal debt limit and the costs and consequences associated with congressional delays in extending Treasury’s borrowing capacity.

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