What Is the Debt Ceiling?

Federal Budget

Ambassador writing program

The Summary

Here we’ll refresh your memory on the debt ceiling before reviewing key provisions from the bill, so you don’t have to read the 40-page document.

On Saturday, June 3, 2023, just days before the Treasury Department projected the country would default on its loans, the President signed into law H.R. 3746, aka the “Fiscal Responsibility Act of 2023”, suspending the debt limit until January 1, 2025. Here we’ll refresh your memory on the debt ceiling before reviewing key provisions from the bill, so you don’t have to read the 40-page document. 

What’s the debt ceiling again? 

The US government borrows money to pay off the budget deficit when its expenses exceed revenue. The responsibility of taking out loans lies with the Treasury Department which issues securities in the form of bonds to investors and uses the generated cash flow to cover the federal deficit. However, at a certain point, commonly referred to as the federal debt limit or debt ceiling, the Treasury Department is no longer authorized to continue borrowing. Although it's the Treasury Department’s responsibility to handle the dollars and cents of government borrowing, only Congress has the power to make changes to the debt limit. 

In May, the White House and Congressional leaders in both chambers worked toward an agreement to avoid reaching the dreaded “X date,” the day the Treasury Department runs out of liquid funds to meet the nation’s financial obligations. In the eleventh hour, a deal was reached that does more than simply address the debt ceiling. Keep reading to find out what’s in the deal. 

1. Debt ceiling suspension

By far the most important action included in the bill is the suspension of the debt limit until January 1, 2025, kicking the can down the road until after the presidential election and allowing the Treasury to resume payments on the nation’s bills. After this suspension ends, the debt limit would be raised by the amount of additional borrowing incurred by the government during this time. 

2. Spending cuts

The bill instituted enforceable spending caps for the next two years, the same length as the debt ceiling suspension, and informal spending limits for the following four years. As a result, total discretionary spending will grow from $1.712 trillion in FY 2023 to $1.781 trillion in FY 2024 and $1.833 trillion in FY 2025. The nonpartisan Congressional Budget Office (CBO) estimated that the effect would be a $1.5 trillion reduction in projected deficits over the next ten years.

3. Work requirements

Republicans came to the negotiating table with a strong interest in increasing work requirements for entitlement programs. In the end, work requirements increased for some and were eliminated for others. Specifically, the bill would expand work requirements for “able-bodied” recipients of Supplemental Nutrition Assistance Program (SNAP) benefits for those 54 and younger, up from 49. Additionally, homeless individuals, veterans, and certain individuals who were previously in foster care are all exempt from work requirements associated with receiving SNAP benefits. Overall, the CBO estimated that these changes would increase the number of individuals who would receive benefits and increase spending for SNAP. Notably, Republicans have challenged the CBO’s estimate.  

4. Walking back pandemic-era relief spending

Congress passed a handful of bills issuing relief to people and businesses during the pandemic. However, a portion of funds from these relief programs remains unspent, and this bill rescinds some of these funds with the intent of making a small dent in the federal balance sheet. The bill also walks back the pause on student loan payment collection, resuming the accrual of interest this fall and preventing the administration from taking executive action to authorize another suspension without congressional approval.

5. What’s not included

As much as Republicans have touted spending reductions, reallocation of unspent COVID funds, increased work requirements, and other Republican priorities which were included in the bill, Democrats have been pointing their supporters to what was kept out of the bill. Key Biden initiatives such as the climate and clean energy incentives in the Inflation Reduction Act and executive action on student debt forgiveness are to remain untouched as a result of the bill. Medicaid, Medicare, and Social Security are also to remain fully intact. 

By suspending the limit until 2025, the Treasury Department may resume payments on the nation’s debt until after the 2024 presidential election, ensuring that the next Congress will be an exciting one.

Keep Exploring


Federal Budget

Care about public policy? You need to understand where the federal government gets - and how it spends - money.

Read More


Social Security

More than 65 million Americans rely on Social Security for retirement income, survivors benefits, and disability insurance payments. Learn more about how the program works, its funding challenges, and the proposals to address them.

Read More


Leadership Programs

Our programs and events help you stay informed and get involved. Want to learn more about issues like Medicare, student loans, and Social Security? Check out our leadership and events section.

Read More


Policy Library

Learn more about our country's biggest challenges.

Read More