The debt ceiling limits how much money the federal government can borrow to pay debts it has already accrued. Congress raised it by $2.4 trillion in the summer of 2011 to $16.4 trillion – just enough to cover the government's obligations until after the November election. It took that action after protracted negotiations led by House Republicans and the White House that sent financial markets down and approval ratings of Congress and President Obama plummeting.
The federal government is expected to run out of maneuvering room on the debt ceiling sometime between February and April.
House Speaker John Boehner (R) had vowed previously to boost the debt limit only by trading $1 in debt increases for $1 in government spending cuts. At a time when Congress is trying to offset at least some part of the $109 billion in automatic spending reductions in 2013 known as the sequester, finding more government cuts to match another debt-ceiling increase would be a tall order.
That means the negotiations over avoiding the fiscal cliff should loop in planning for raising the debt ceiling, many in Washington argue.
“The smart thing to do would be to, yes, embed the debt ceiling in whatever deal they do, because they are related,” says Bruce Josten, executive vice president for government affairs at the US Chamber of Commerce.
Democrats have a simple answer to this conundrum: Raise the debt ceiling with minimum political wrangling.
“I would think the debt ceiling has to be part of any short-term discussion,” says Rep. Chris Van Hollen of Maryland, top Democrat on the House Budget Committee. “The best way to resolve it in the most responsible way ... is not to play politics with the debt ceiling. We saw what kind of disruption, chaos, that caused last summer.”