What it is
This limit, set by Congress, covers spending already authorized, not future spending. When the national debt reaches the ceiling, the Treasury Department cannot issue new debt. To avoid default, the Treasury often employs "extraordinary measures" to manage cash flow temporarily, such as suspending investments in government employee retirement funds.
Debates over raising or suspending the debt ceiling often become politically charged, creating uncertainty in financial markets. Failure to raise the ceiling could lead to a U.S. government default, which would have severe global economic consequences, including higher borrowing costs, a credit rating downgrade, and market instability.
Why it matters
A failure to raise the debt ceiling could trigger a U.S. default, causing severe market disruptions and damaging global financial stability.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice