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Illustration: Aïda Amer/Axios

It was bliss while it lasted — which was exactly two years. Right now, the U.S. has no limit on the amount of debt it can issue. But that ends on Saturday.

Why it matters: Brace yourself for another round of unedifying posturing and brinkmanship, all of which should result — after a period of entirely unnecessary fiscal contortion — in the debt ceiling being raised (not abolished) sometime this fall.

The big picture: The debt ceiling cannot do what it purports to do, which is control the amount that the government borrows. The tax and spending bills passed by Congress are legally binding, and the debt ceiling neither enables nor constrains them.

  • When Treasury needs to borrow money in order to follow the law of the land, it has no choice but to raise the debt ceiling. The alternative — default — is unthinkable.

Where it stands: Under the terms of the Bipartisan Budget Act of 2019, the debt ceiling comes back into force on August 1, at exactly the level of the national debt. It has to be raised, but Republican leadership is on the record saying that they will not vote for such a thing.

What they're saying: Treasury Secretary Janet Yellen, in a letter to Congress last week, urged members to "protect the full faith and credit of the United States by acting as soon as possible."

  • Don't hold your breath. Congress is focused on the infrastructure bill right now. So far, no one's started seriously grappling with the debt ceiling, partly because Treasury is still sitting on about $450 billion in cash.
  • Treasury will use "extraordinary measures in order to prevent the United States from defaulting on its obligations," says Yellen in her letter — but given the uncertainty engendered by the pandemic, no one knows how long those measures might last.
  • The best estimate of a "drop dead date," from the Bipartisan Policy Center, is early November, but no one wants this saga to drag on that long.

What's next: Congress is about to enter recess until September, and while it might return in August for the sake of an infrastructure bill, no one's expecting movement on the debt ceiling until October.

  • The most likely scenario, per Axios' Alayna Treene, is that Congress simply kicks the can down the road for a couple of months before doing a bigger debt-ceiling raise around Christmas.

The bottom line: No other country has an entirely artificial debt ceiling causing regular and predictable political agita. While every Treasury Secretary would dearly love for this archaic annoyance to simply be abolished, Congress invariably insists on keeping it alive, mostly so that its members can continue to score cheap political points off each other.

Go deeper

Sep 20, 2021 - Politics & Policy

Yellen: U.S. would be "permanently weaker" if debt limit not raised

Treasury Secretary Janet Yellen speaks during an event Wednesday in Washington, D.C. Photo: Drew Angerer/Getty Images

Treasury Secretary Janet Yellen warned in a Wall Street Journal op-ed on Sunday that the U.S. could face a fresh financial crisis if Congress failed to raise or suspend the country's debt ceiling.

Why it matters: The U.S. has never defaulted on its debt, but some Republican lawmakers have threatened to vote against raising the debt ceiling, arguing that it would only promote more government spending.

Sep 20, 2021 - Politics & Policy

Democrats propose raising debt ceiling through midterms

Speaker of the House Nancy Pelosi and Senate Majority Leader Chuck Schumer. Photo: Stefani Reynolds/Bloomberg via Getty Images

House and Senate leadership announced on Monday that they plan to attach a proposal to raise the debt ceiling through Dec. 2022 to a short-term, government funding bill. The bill must pass before the end of the month or Congress risks a shutdown.

Why it matters: Democrats are taking a huge risk by trying to force through an increase of the debt limit in its must-pass funding bill. The move is wishful thinking on behalf of Democrats who are hoping they can get at least 10 centrist Republicans to balk, as well as an effort to put Republicans on record opposing it.

Wall Street's wobble disrupts record stock market boom

People walk by the New York Stock Exchange earlier this month. Photo: Spencer Platt/Getty Images

Monday interrupted a stretch of calm amid the historic stock market boom underway since March 2020.

Driving the news: Jitters were apparent nearly everywhere.

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