Relevant news story: [https://www.bbc.co.uk/news/world-us-canada-65781359](https://www.bbc.co.uk/news/world-us-canada-65781359)
So the US is borrowing money because it can’t pay for the money it already owes? As a consumer I’d think that is a really bad sign but apparently raising the borrowing limit has historically been “a formality”, so it’s not a bad thing?
Also “The legislation will result in $1.5tn in savings over a decade”, How does that work? Do you not pay interest on national debt or something? Also, where is the money coming from?
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When the government needs to spend more than it takes in with tax revenue, it issues bonds that it sells to investors.
The debt ceiling is like a credit limit on a credit card that caps how much debt the government can issue in total. They’re always retiring bonds that mature, and issuing new ones… when more are issued than retired, then debt grows. There are times where spending in excess of revenue is critically important — times of war, recession, pandemic, etc. where spending needs to increase and revenues decline.
Historically, the debt ceiling is like a credit card limit and raising it is like asking a credit card company to increase your credit limit.
However, the GOP has repeatedly used debt ceiling to hold Democratic presidents hostage and extract spending concessions in return for not blowing up the economy. On the flipside, the Dems have always approved as a formality when needed (3x during Trump’s administration, for example).
The savings come from those concessions/adjustments to government spending as part of the debt ceiling deal. In return for the approval of raising the debt ceiling, cuts were made to programs like Medicaid, IRS staffing/modernization, food stamps, etc.
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