The United States (US) is one of the most developed countries and has the most stable economic sector in the world.
However, the country's debt is also the highest in the world, reaching $31.4 trillion as of January 2023.
Therefore, in 1917, the debt ceiling was introduced under the Second Liberty Bond Act to prevent the US from continuing to be burdened with an excessive amount of debt.
This debt ceiling was enacted during World War I to coordinate spending and put the US government on a stable financial footing.
What is the Debt Ceiling?
The debt ceiling is the maximum limit of the amount of debt that can be incurred by the US in carrying out its government operations including paying civil servant salaries, government bills and so on.
This debt ceiling is not to restrict the amount of government spending in the future but rather it is intended to guide the government in planning its spending better in the future.
If the government's debt has reached the ceiling limit, the treasury has to find other alternatives to complete the government's financing while waiting for the debt ceiling to be raised.
What is Date X?
Last January, the treasury body started using measurement measures or "extraordinary measures" to ensure that the government can continue their responsibility in making payments after reaching the debt ceiling.
Date X is the date on which the government is no longer able to make payments and is categorized as default.
Experts say the X date may come as early as June 1.
Who can raise the debt ceiling?
Congress has the body responsible for this, but lawmakers need to reach an agreement between the White House (majority Republicans) and the Senate (majority Democrats).
However, it is difficult for these two parties to reach an agreement when the Republicans want any way to raise the debt ceiling including spending cuts while the Democrats do not want any cuts in government spending.
How many times has this debt ceiling been raised?
According to the Treasury Department, Congress has raised the debt ceiling whether permanently, temporarily or under supervision 78 times since 1960.
What will happen if the debt ceiling is not raised?
If Congress does not raise the debt ceiling by X date, the US government will default and will not be able to meet its obligations in paying civil servant salaries and other bills that need to be settled.
But this has never happened to the US.
Economists are also of the view that the US dollar will experience a significant fall in value as the king of the currency's status as a safe-haven is beginning to be doubted.
The stock and bond markets are expected to experience a massive sell-off after investors' fears start to hit like a 'black swan' situation that has happened before.
House prices will rise sharply as interest rates are predicted to soar after the default situation and the economy will face a long period of recovery.
