The United States of America is among the greatest superpowers in the world, but the great U.S.A also has some troubling events sitting on the horizon. U.S. debt has been a great concern for many presidents since the 1960s when we first hit the debt ceiling. The debt ceiling will always be an issue, but recent rumors speculate that the U.S. may default on its debt for the first time in history. This could mean catastrophic levels of changes that could send us far into the depths of economic recession. 

What is the debt ceiling/debt limit? “The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments,” the U.S. Department of the Treasury website says. 

The debt limit and debt ceiling are interchangeable in their meanings and uses. 

In January 2023, the U.S. hit the debt ceiling again at an estimated astounding $31.41 trillion dollars. To put that in perspective, that is the entirety of the Kardashian family’s net worth over 31,000 times. There are several things you need to know before diving into all the issues that come with a national debt that large. Firstly, there are two different classifications of national debt: intragovernmental debt and public debt. Most commonly when we envision national debt we think of public foreign debt holders, like China and more accurately, Japan (who currently holds 1.08 trillion dollars worth of U.S. debt).  Intragovernmental debt is money the Treasury owes to other parts of the federal government; the biggest offender of intragovernmental debt is the Social Security program. However, this is not where the majority of debt comes from. Public debt makes up more than 24.53 trillion dollars worth of national debt. Public debt is owed in a large portion to foreign governments, but the rest of that comes from U.S. banks and investors, the Federal Reserve, state and local governments, insurance companies, etc. 

Economists and politicians go back and forth over the issue of national debt. Some argue that national debt to some extent, is an essential part of economic growth. Yet the “higher the national debt becomes, the more the U.S. is seen as a global credit risk. This could impact the U.S.’s ability to borrow money in times of increased global pressure and put us at risk for not being able to meet our obligations to our allies—especially in wartime,” Forbes, a leading business magazine says. 

The biggest challenge we face this year is whether or not the U.S. Congress will choose to raise the debt ceiling, or default on its legal obligations, the latter posing a serious and very real economic crash risk. 

If the United States Congress fails to raise the debt ceiling, for the first time in history, there will absolutely be consequences. To avoid this, the U.S. Treasury is regressing towards emergency measures. According to a CNN report released January 19, 2023, the Treasury has already begun selling investments located in “special-issue Treasury securities.” The Treasury promised to make these funds whole again once the issues have been resolved. A default could shake economies across the world. If Congress fails to raise the debt ceiling this time around, “Americans could also face a recession, including higher unemployment, and the stock and bond markets would likely plunge. Recipients of federal benefits, such as Social Security recipients, might not get their monthly checks,” CBS news states. 

Some congress representatives say that even the slightest idea that the U.S. may default on its debt is already rippling economies in countries throughout the world. 

The potential for economic recession is a very scary thought for Americans across the nation and even for people across the world. America, the unshakeable nation, at the brink of financial catastrophe is not a particularly entertaining thought. However, there is hope, CBS news suggests that there are several ways this could go differently if the U.S. does default, the Secretary of the Treasury could potentially issue a $1 trillion “platinum” coin at the Federal Reserve, which would buy some time, until the famed  “Date X.” Date X is a commonly used term to describe how much time the nation would have until catastrophe hits if we do default. Date X for right now, is set in late June. 

While this all seems large and impossible to deal with, it is important to remember that as a citizen, there is not much you can really do in regards to the debt ceiling. This national policy issue goes beyond the reaches of the ordinary college student. So until the day comes later this year, do not spend your energy worrying about it. As our nation grows and changes there will always be challenges beaming on the horizon, but what we have overcome before, we can overcome again.