Statutory Debt Limit

If you thought your debt was bad, don’t worry. The U.S. has you beat.

It’s been racking up the national debt since the 1930s. It was $43 billion in 1940...half of GDP output that year. Fast-forward to 1960. It’s $286 billion, again about the equivalent to half of GDP that year. It exploded in the 1980s, and just kept going. In 2018, the U.S. national debt was a whopping $21,516 billion (that’s $21.5 trillion), which was more than the total GDP of 2019 (105% of it, to be exact).

This begs the question: is there any limit to the national debt?

The answer: yes. The statutory debt limit, a.k.a. the “debt ceiling.” Congress sets the statutory debt limit: the limit of the amount of debt that the U.S. can take on to fulfill its legal obligations. The U.S. government has to cover Social Security, Medicare, tax refunds, military salaries, and any interest payments on outstanding debt (at least the interest payments). That means the U.S. can borrow money to pay for all of that...but only up to the debt ceiling amount.

How easily is that limit moved? Well, it’s been moved almost 80 times in the last 60 years, so...you do the math. Pretty often.

Why do they keep raising it? Because if they didn’t, the U.S. government would fall short of its financial obligations...and that’s just not an option. Stability is everything. Reputation is everything. The U.S. dollar has to keep up appearances, even if it costs trillions of dollars.

Now put those hands in the air, and raise that ceiling...like it’s 1990, or 1962, or...any year, really. Pick your favorite.