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In the United States, the debt ceiling or debt limit is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury, thus limiting how much money the federal government may pay by borrowing more money, on the debt it already borrowed. The debt ceiling is an aggregate figure that applies to gross debt, which includes debt in the hands of the public and intra-government accounts. About 0.5 percent of the debt is not covered by the ceiling (as of 10/2013).[1] Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit government deficits. In effect, it can only restrain the Treasury from paying for expenditures and other financial obligations after the limit has been reached, but which have already been approved (in the budget) and appropriated. Many scholars[by whom?] argue that the debt ceiling does not provide the legal authority for the United States to default on its debt.[2][3][4]

When the debt ceiling is reached without an increase in the limit having been enacted, Treasury will need to resort to "extraordinary measures" to temporarily finance government expenditures and obligations until a resolution can be reached. The Treasury has never reached the point of exhausting extraordinary measures, resulting in default, although, on some occasions, it appeared that Congress might allow a default to take place. If this situation were to occur, it is unclear whether the Treasury would be able to prioritize debt payments to avoid a default on its bond obligations. A protracted default could trigger a variety of economic problems including a financial crisis, and a decline in output that would put the country into an economic recession.[5]

The 14th Amendment of the United States Constitution states that "the validity of the public debt of the United States, authorized by law, ..., shall not be questioned." Many scholars argue that this clause means that it is unconstitutional for the United States to default on its debt.[4][2][3] If this is true, then there is no legal basis for the United States government to default on its public debt, even if this would mean that its spending would exceed the limit set through the debt ceiling law.

Management of the United States public debt is an important part of the macroeconomics of the United States economy and finance system, and the debt ceiling is designed to be a constraint on the executive's ability to manage the U.S. economy. There is debate, however, on how the U.S. economy should be managed, and whether a debt ceiling is an appropriate or constitutional mechanism for restraining government spending.[citation needed]