The most recent budget-extension debate on Capitol Hill underscored the ongoing controversy surrounding the debt ceiling.
To address the nation’s growing debt and spending issues, it is crucial to understand what the debt ceiling is — and what it isn’t.
The mainstream media and lawmakers from both parties have often misled the public about what debt-ceiling votes actually do. A common misconception is that raising the debt ceiling amounts to approving new spending. It does not.
The U.S. Treasury Department clarifies this point: The debt ceiling does not authorize new spending commitments. It merely allows the government to finance existing legal obligations made by previous Congresses and administrations. Failing to raise the debt ceiling could trigger catastrophic economic consequences, including a default on the nation’s legal obligations. That would create a financial crisis and jeopardize Americans’ jobs and savings.
In short, raising the debt ceiling doesn’t increase government spending, and voting against it doesn’t reverse any spending already authorized by Congress.
A default would severely damage the dollar’s status as the world’s safest currency, leading global investors to pull their funds from U.S. markets.
So why has the debt ceiling issue been so controversial? Many lawmakers fear that voting to raise it could be seen by constituents as endorsing more reckless spending. Others, less concerned with optics, use the vote as leverage to secure changes to the budget.
President Trump preferred extending the debt ceiling for several years. He understood the political risks of having to vote on it again in March, and didn’t want to appear to be recklessly increasing government spending. Additionally, he was wary of giving Democrats leverage in future negotiations, fearing they would hold the debt ceiling hostage to secure spending concessions.
If the debt ceiling issue were handled through the reconciliation process, it would require only 50 votes in the Senate, rather than the typical 60 needed for non-budget matters. Republicans could theoretically pass the measure without Democratic support, though that would require unity in the party, which isn’t guaranteed. Trump was also concerned about the optics of the GOP raising the ceiling while Democrats opposed it, accusing Republicans of hypocrisy.
Democrats are divided on the issue. Some, like Sen. Elizabeth Warren, want to abolish the debt ceiling altogether, arguing that it gives fiscal conservatives too much leverage. Others want to keep it in place as a bargaining chip to increase spending when Republicans hold power.
The debt ceiling has become largely meaningless, as Congress continues to increase spending, knowing it can later raise the ceiling to accommodate the expanded budget.
So why continue the annual charade? Both Trump and Warren are right in wanting to push the debt-ceiling vote further into the future, though for different reasons.
Ultimately, the real impact comes from the annual budget votes. If conservatives want to control spending, the solution is to push for a balanced-budget amendment.
Every state and local government is required by law to balance its budget — yet the federal government is the only public entity that is not. That needs to change. As outlined in our Center for Cost-Effective Government white paper on spending caps, these measures work by forcing lawmakers to prioritize spending.
Fiscal conservatives should seize the opportunity to eliminate the debt-ceiling vote altogether by tying it to the enactment of a balanced-budget amendment.
While people like Elon Musk and Vivek Ramaswamy can propose spending cuts, they lack the authority to implement them. A balanced-budget amendment would compel Congress to implement those cuts and rein in spending.
Steve Levy is executive director of the Center for Cost-Effective Government, a fiscally conservative think tank. He has served as Suffolk County executive, as a state assemblyman and as host of “The Steve Levy Radio Show.”