The United States government hit its borrowing limit last week on January 19, leading to new economic worries at a time when most countries are expecting a slowdown in economic growth. The US administration has already started implementing measures to avoid any default, which could have catastrophic effects on both domestic and global economies. Here are the nuts and bolts of the debt ceiling issue and why it matters.The debt limit, also known as the debt ceiling, is the statutory limit for the amount of money that the US Treasury can borrow in the form of securities, including bills and savings bonds, in order to finance existing federal operations. This may include spending by the US government on Social Security and Medicare benefits, or paying salaries and meeting other financial obligations. Under the US Constitution, only Congress is authorised to set the amount the US can borrow, and that limit is set through a vote in Congress. In the last such vote in December 2021, it was fixed at $31.4 trillion. On January 19, the debt of the United States hit this ceiling, raising concern among corporate leaders of a potential political standoff that could come down to the wire, unsettling markets.The US has touched or neared the debt limits at least 20 times in the past two decades because of a host of measures — by both parties when in power — including higher spending or tax cuts, and lower revenues during various economic crises.
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