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What is DC doing to its debt ceiling?

September 8, 2017

It depends on what you mean by ‘raise’ or ‘limit.’

A couple days ago, I delivered a fun exercise to my students.  In light of growing pressures for the federal government to raise its purported debt ceiling, I asked them to forecast 1) the date the official debt limit increases, 2) the amount of the new limit, and 3) the amount of the increase in reported debt once the new limit goes into effect, given that the reported debt has been effectively frozen by extraordinary accounting measures, even as the real debt has been increasing for months.

When I got back to work after class, I saw that news had broken during class that an agreement had been reached.  In a controversial development, the Republican President agreed with relevant Democratic congressional leaders on a plan of action.  Nearly all the stories that have come out have identified an agreement to “raise the debt limit.”

Is the debt limit being raised?  If it is, what is it being raised to?

One could argue that there are two ways to answer these questions.  The debt limit isn’t being raised – it is being suspended, at least until early December, so there will be no debt limit until then (and if then).  Another way to answer the question is that the new debt limit will be infinity.

The agreement also reportedly includes discussion of the possibility of eliminating the debt ceiling altogether.  Should get interesting.

 
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