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Debt Ceiling (September 2013 update)

The debt ceiling, in simple terms, is the maximum amount of money the United States can borrow in order to pay its existing obligations. The debt ceiling (or limit) when raised does not allow for new expenditures, but instead allows the government to pay for programs it has already committed to paying for. Historically, raising the debt limit was done quickly and without contention, as it was seen as a financial necessity and not as political capital. Since 1960, Congress has raised, extended or revised the debt limit a total of 78 times, and up until recently it was not used as political leverage.

In late August, Jack Lew, the Secretary of the Treasury, announced that the U.S. would hit its borrowing limit (reach the debt ceiling) by mid-October, 2013. Yet the dynamics of the partisan rift in Congress shows no sign of abating. Many among House Republicans, in particular, are pushing to link a hike in the debt ceiling with deep spending cuts in domestic, discretionary programs, while some want to focus the debate around their effort to "de-fund" the Affordable Care Act.

The administration has maintained that it will not negotiate over the debt ceiling since it consists of monetary obligations already approved by Congress and should be raised when necessary. Failure to raise the debt limit could prompt a credit-rating downgrade, could slow an already tepid economic recovery by damaging the confidence of businesses, investors and consumers, and could be especially harsh on those who are poor because there would be no funding for the programs they would desperately need.

Political wrangling over the debt limit has become part of the fiscal battle in Congress since 2011 when the tactic was first used.