January 17, 2018

The U.S. government must pass funding legislation by January 20th to avoid a government shutdown. A large part of funding the government is paying its bills. In order to do this, Congress must also address the debt ceiling by early spring. 

To demystify these two major issues, the Committee for a Responsible Federal Budget (CRFB) has produced two Q&As about the debt ceiling and government shutdowns that you can use to be an informed citizen and successful Up to Us ambassador. We wanted to highlight two questions we are often asked: what is the debt ceiling and why does it need to be raised and what are the impacts of a government shutdown?

Q: What is the debt ceiling and why does it need to be raised?
The federal debt ceiling was reinstated on December 9th, 2017 at $20.5 trillion and, since then, “extraordinary measures” have been used to avoid defaulting on loans. Congress needs to raise the debt ceiling because government spending is projected to exceed revenue this year and without an increase, a default could be imminent. If the debt ceiling is reached and the government defaults on its loans, there would be a series of extremely negative economic consequences domestically and internationally. Ideally lawmakers would work to control the ballooning national debt by coupling a debt ceiling increase with measures to address fiscal health. Extraordinary measures (aka accounting maneuvers) will run out by early spring 2018 and the Treasury Secretary has recommended raising the debt ceiling as soon as possible. 

Q: What are the impacts of a government shutdown?
A government shutdown is imminent if Congress does not pass appropriations bills for the fiscal year or another continuing resolution by January 19th, 2017. In a shutdown, most federal agencies stop any non-essential function while some agencies related to public safety remain operational. Most federal agencies who would be affected by a shutdown have a contingency plan. To avoid a shutdown Congress either passes appropriations bills (annual funding for the fiscal year) or a continuing resolution (continues funding from previous bills, in the absence of a full appropriations bill). There have only been three true shutdowns in the history of the U.S. government. 

A default is much worse economically than a shutdown although neither is ideal. According to the CRFB “a government shutdown would be disruptive, a government default could be disastrous.” Full fact sheets about the debt ceiling and government shutdowns can be found on the CRFB website.