# Debt Ceiling: Please Explain **URL:** \ **Category:** Factual Questions\ **Created:** [July 14, 2011, 2:52pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017 "2011-07-14T14:52:31Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![isaiahrobinson](https://avatars.discourse-cdn.com/v4/letter/i/85e7bf/32.png) [@isaiahrobinson](https://boards.straightdope.com/u/isaiahrobinson)\ **Post date:** [July 14, 2011, 9:26pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/21 "2011-07-14T21:26:32Z")
> [@HamishBlake](#): > > When is the last time they had a deadline to raise it and didn’t? And what happened? I am hearing all sorts of doomsday scenarios on the local news. It’s never really happened before, because the minority party has never held the debt ceiling hostage like this before. [This](http://www.washingtonpost.com/blogs/ezra-klein/post/what-failure-to-raise-the-debt-ceiling-will-look-like/2011/05/19/AGK9tvtH_blog.html) is a good article, citing a study by the Bipartisan Policy Center led by George H.W. Bush’s undersecretary to the Treasury, explaining what it will look like. Essentially government spending in august would probably drop by about 35%. It could genuinely be a serious shock to the economy, and Wall Street is supposedly terrified about it happening and giving Republican leaders in Congress a lot of heat through back channels. For that reason I don’t think there’s a chance it won’t happen, but the Tea Party and the Republican base is dead-set against doing it in any circumstances so it’s concerning. > [@](#): > > **What failure to raise the debt ceiling will look like** > > Ever wondered how many bills the federal government pays in a month? It’s not 100, or 1,000, or 10,000, or even 200,000. It’s 80 million. Every month. And according to a new analysis by the Bipartisan Policy Center, if the debt ceiling isn’t raised by Aug. 2, the Treasury Department is going to have to figure out which 30 million of those bills should go unpaid. > > The BPC’s analysis was led by Jay Powell, who served as undersecretary of the Treasury in George H.W. Bush’s administration. It’s not pretty. Powell and his team estimate that if we don’t raise the debt ceiling, Treasury will only be able to pay 55-60% of the federal government’s bills in August. > > The paper lays out a few scenarios for how that might go. In the “Protect Big Programs” scenario, Treasury pays bills related to interest on the debt, Medicare and Medicaid, Social Security, defense suppliers and unemployment insurance. That means it stops paying military salaries, gives up on the FBI and the Centers for Disease Control, cuts all funding for food stamps and education, shuts down air control, tells NASA to head home, freezes the paycheck of every federal employee, and much more. In another, the Treasury Department tries to protect the social safety net, but has to stop supplying the troops, sending out tax refunds, inspecting offshore oil rigs, etc. > > This also leads to an extraordinary assertion of executive power. The executive branch carries out the laws enacted by Congress. Asking them to “prioritize” across different spending needs is asking them to selectively decide between different laws that Congress has passed. > > Since the Treasury has never had to make these decisions before, no one quite knows how they’ll be made. The BPC estimates a 44 percent drop in federal spending, but can’t precisely estimate where that drop will happen. That means nobody else can, either. So as we get closer to doomsday, companies that contract with the federal government will start hoarding cash to tide them through a period in which they might stop being paid. Seniors and other Americans who rely on federal transfers would be wise to do the same. And then if we do pass the borrowing limit, the economy is going to have to absorb a sudden and sharp drop in federal spending, which will reverberate among businesses that don’t directly work with the government but sell to those who do. > > But at least we’re leaving the bond market alone, right? Wrong. According to the BPC’s calculations, the federal government needs to roll over $500 billion of debt in August. If we’re in quasi-default, who will want to purchase that debt? What will they charge us when they do purchase that debt? A 10 percent premium would cost us $50 billion. A one percent premium would cost us $5 billion. And that’s only the direct cost. Because so many other kinds of debt benchmark against the rates the Treasury pays, you’ll see borrowing costs rising throughout the system. Mortgages, corporate borrowing, all of it. It won’t just be the federal government that pays. It’ll be the economy. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [July 14, 2011, 9:29pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/22 "2011-07-14T21:29:45Z")
> [@HardlySanguine](#): > > Is the debt ceiling automatically increased with the inflation rate? It’d be interesting to see, historically, how much beyond yearly inflation the ceiling has been raised. > > (As a side question, is there somewhere that has a list of the various familiar financial ratios we use to evaluate businesses, as applied to the U.S.?) The debt ceiling isn’t automatically increased, period. Inflation has nothing to do with it. Trying to tie inflation to debt is meaningless. If we had runaway inflation, increasing the debt ceiling would be pointless as no one would lend us any money anyway. The debt ceiling rises when congress authorizes an increase, period. ---
**Author:** ![Implicit](https://avatars.discourse-cdn.com/v4/letter/i/6a8cbe/32.png) [@Implicit](https://boards.straightdope.com/u/Implicit)\ **Post date:** [July 14, 2011, 9:40pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/23 "2011-07-14T21:40:14Z")
> [@HamishBlake](#): > > When is the last time they had a deadline to raise it and didn’t? And what happened? I am hearing all sorts of doomsday scenarios on the local news. The Republicans threatened to not raise the debt ceiling in 1995, and eventually the [government shutdown](http://en.wikipedia.org/wiki/United_States_federal_government_shutdown_of_1995_and_1996) after President Clinton vetoed a spending bill, so not exactly the same thing, but a similar political squabble over funding the government. > [@](#): > > Since a budget for the new fiscal year had not been approved, on October 1 the entire federal government operated on a continuing resolution authorizing interim funding for departments until new budgets were approved. The existing continuing resolution was set to expire on November 13 at midnight, at which time non-essential government services would be required to cease operations in order to prevent the country from defaulting on its debt. Congress had passed a continuing resolution for funding and a bill for debt limit extension, each of which was vetoed by Clinton,[1][3] who denounced them as “backdoor efforts” to make cuts.[2] At the moment, the government of Minnesota is shutdown due to a budget impasse. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [July 14, 2011, 9:44pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/24 "2011-07-14T21:44:26Z")
> [@isaiahrobinson](#): > > This is why the concept of a debt ceiling itself is fairly absurd. It serves no purpose other than either allowing the minority party to make a protest by voting against it or, for the first time this year, for the minority party to hold the full faith and credit of the country as a hostage in exchange for policy concessions it doesn’t think it can win otherwise. Only congress has the authority to issue debt. It makes some sense to place a limit on issuing debt without getting approval first. Nearly every company requires a corporate resolution in order to issue new debt. You can’t get a commercial loan in this country without providing evidence that the board of directors of the company has authorized the new debt issuance. It shouldn’t hold the full faith and credit of the country hostage to not issue any new debt. Granted that it potentially does now, but that is only because our debt load is so high that interest expense is a massive portion of the budget and that plus our mandatory expenses exceeds the revenue we bring in. Also, the reason Republicans are able to hold the country hostage, as you say, is that they are not the minority party in congress. The are the majority party in the House and the minority in the Senate. You could just as easily say that the Democrats are holding the country hostage. ---
**Author:** ![Gorsnak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gorsnak/32/7587_2.png) [@Gorsnak](https://boards.straightdope.com/u/Gorsnak)\ **Post date:** [July 14, 2011, 9:55pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/25 "2011-07-14T21:55:43Z")
> [@LonghornDave](#): > > Only congress has the authority to issue debt. It makes some sense to place a limit on issuing debt without getting approval first. Sure, and it’s called the budget. You know, where Congress decides how much to spend and on what, and how much to raise via taxes. If the spending is more than the taxing, then Congress has already approved borrowing the money. A separate debt ceiling is just dumb. ---
**Author:** ![HardlySanguine](https://avatars.discourse-cdn.com/v4/letter/h/96bed5/32.png) [@HardlySanguine](https://boards.straightdope.com/u/HardlySanguine)\ **Post date:** [July 14, 2011, 9:59pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/26 "2011-07-14T21:59:56Z")
> [@LonghornDave](#): > > The debt ceiling isn’t automatically increased, period. Inflation has nothing to do with it. Trying to tie inflation to debt is meaningless. If we had runaway inflation, increasing the debt ceiling would be pointless as no one would lend us any money anyway. The debt ceiling rises when congress authorizes an increase, period. The impression I get from the news is that we’re always increasing our debt limit because the government is constantly spending way more than it should, and there’s something wrong with a constantly increasing ceiling. I’m not concerned with runaway inflation. Is increasing our debt limit primarily to compensate for inflation? A whole lot more? ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [July 14, 2011, 10:15pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/27 "2011-07-14T22:15:30Z")
> [@Gorsnak](#): > > Sure, and it’s called the budget. You know, where Congress decides how much to spend and on what, and how much to raise via taxes. If the spending is more than the taxing, then Congress has already approved borrowing the money. A separate debt ceiling is just dumb. I don’t disagree that by simply passing a budget that has a deficit in it you are implicitly authorizing an increase in the debt. There certainly is a sense of repetition in the process. However, they are separate although similar acts. It’s possible, for one example, that they may need to issue more debt than is predicted by a budget deficit. It seems there should be some mechanism for approving additional debt issuances. Further, the concept of the debt ceiling was put in place to fix the problem of congress needing to authorize every single debt issuance. I think it should get raised. I do think that this is a very scary game of seeing who will blink first. I also think that there is a need for major reform as we simply have too much debt (including the contingent obligations). Republicans should accept some smaller version of spending reductions $1-2 trillion. THat would get us through this. ---
**Author:** ![curious11](https://avatars.discourse-cdn.com/v4/letter/c/ac91a4/32.png) [@curious11](https://boards.straightdope.com/u/curious11)\ **Post date:** [July 14, 2011, 10:20pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/28 "2011-07-14T22:20:22Z")
> [@Wheelz](#): > > That’s OK, you can just raise your Typo Ceiling. Good One! Made me smile! ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [July 14, 2011, 10:28pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/29 "2011-07-14T22:28:49Z")
> [@HardlySanguine](#): > > The impression I get from the news is that we’re always increasing our debt limit because the government is constantly spending way more than it should, and there’s something wrong with a constantly increasing ceiling. I’m not concerned with runaway inflation. Is increasing our debt limit primarily to compensate for inflation? A whole lot more? The debt ceiling has essentially nothing to do with inflation. And there is nothing wrong with the concept of an eternally rising debt ceiling. We could do away with the concept entirely, or sidestep it as I mentioned earlier. For a while under Clinton, the U.S. was running a surplus. We spent less than we took in. The debt ceiling does not have to be raised under those circumstances, even if there is nominal inflation. (There was, and almost always is.) I don’t want to get into the usual ideological quagmire, but the combination of the [dot.com](http://dot.com) bust, the loss to the economy after 9/11, the decision to invade Afghanistan and Iraq, and the lowering of the top income tax rate all hit more or less simultaneously under Bush. The surplus went to a deficit. And the way the government finances a deficit is to increase borrowing. Therefore the total amount of debt increased every year. This was more or less manageable until the recession undercut the economy. About a trillion dollars in government revenues vanished from fiscal 2008 to fiscal 2009. The shortfall has actually decreased somewhat in more recent budgets, but still runs over a trillion per year. That adds up very quickly. A three trillion dollar rise in the debt ceiling is therefore only a two year fix. That’s why Congress has to address this so often. ---
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [July 14, 2011, 10:34pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/30 "2011-07-14T22:34:18Z")
> [@Exapno\_Mapcase](#): > > Why Congress doesn’t raise the debt ceiling by $100 trillion at one time so that they never have to vote on it again in their lifetimes is a different question that I’ve never seen answered. Anybody know this one? Because everyone knows that there is a _real_ debt ceiling that no one wants to hit. The _real_ debt ceiling is when we’re so far in hock that people lose confidence in us, and stop lending us money. We don’t know where that point is exactly; we may have a ways to go, we may be quite close to it. Nobody knows. But if/when it does arrive, it’ll be very, very ugly. The phony debt limit is a way to keep reminding ourselves that we don’t want to hit the _real_ debt limit. We keep moving it, like the credit addict who keeps saying “okay, just this one last pair of shoes (which I totally need) and then I’ll start paying down my credit cards.” ---
**Author:** ![Tom\_Tildrum](https://avatars.discourse-cdn.com/v4/letter/t/e95f7d/32.png) [@Tom\_Tildrum](https://boards.straightdope.com/u/Tom_Tildrum)\ **Post date:** [July 14, 2011, 10:51pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/31 "2011-07-14T22:51:27Z")
> [@Elendil\_s\_Heir](#): > > I love this, and want to pass it along to some friends. Do you have a cite? Here’s [one](http://www.thirdway.org/publications/387). Beware, though; it cuts both ways. ---
**Author:** ![Lord\_Feldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lord_feldon/32/341_2.png) [@Lord\_Feldon](https://boards.straightdope.com/u/Lord_Feldon)\ **Post date:** [July 14, 2011, 10:53pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/32 "2011-07-14T22:53:45Z")
> [@Gorsnak](#): > > Sure, and it’s called the budget. You know, where Congress decides how much to spend and on what, and how much to raise via taxes. If the spending is more than the taxing, then Congress has already approved borrowing the money. A separate debt ceiling is just dumb. That’s actually how it works most of the time. Had the House not gotten rid of the [Gephardt rule](http://www.csmonitor.com/USA/Politics/2011/0104/Five-ways-Republicans-will-change-the-House/Repeal-of-the-Gephardt-rule) (as they did in 1995), that’s how it would have worked this year, too. ---
**Author:** ![AlienVessels](https://avatars.discourse-cdn.com/v4/letter/a/ba8739/32.png) [@AlienVessels](https://boards.straightdope.com/u/AlienVessels)\ **Post date:** [July 14, 2011, 11:06pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/33 "2011-07-14T23:06:18Z")
> [@LonghornDave](#): > > Also, the reason Republicans are able to hold the country hostage, as you say, is that they are not the minority party in congress. The are the majority party in the House and the minority in the Senate. You could just as easily say that the Democrats are holding the country hostage. No, the Republicans have also demonstrated with unprecedented frequency that you CANNOT get anything done in the Senate without 60 votes. So it only takes 41 to hold the country hostage. Since from a partisan perspective, making sure nothing gets done is in the GOP advantage, especially regarding ANYTHING, even GOP initiated proposals, that Obama supports, all it takes is 41 to completely undermine the workings of the government that GOPers assert cannot do anything effectively. Nice little feedback loop, that. ---
**Author:** ![isaiahrobinson](https://avatars.discourse-cdn.com/v4/letter/i/85e7bf/32.png) [@isaiahrobinson](https://boards.straightdope.com/u/isaiahrobinson)\ **Post date:** [July 14, 2011, 11:24pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/34 "2011-07-14T23:24:15Z")
> [@LonghornDave](#): > > Only congress has the authority to issue debt. It makes some sense to place a limit on issuing debt without getting approval first. Nearly every company requires a corporate resolution in order to issue new debt. You can’t get a commercial loan in this country without providing evidence that the board of directors of the company has authorized the new debt issuance. I don’t understand. Every dime the government spends has already been authorized by Congress. It’s not a very good analogy but a better version of it would be for the directors of the company to authorize new debt issuance, and provide evidence for it, and yet still be required to authorize a ‘debt ceiling’ increase every year to account for those loans. It makes no sense. > [@](#): > > It shouldn’t hold the full faith and credit of the country hostage to not issue any new debt. Granted that it potentially does now, but that is only because our debt load is so high that interest expense is a massive portion of the budget and that plus our mandatory expenses exceeds the revenue we bring in. Yes, as you say, refusing to raise the debt ceiling unless demands are met holds the full faith and credit of the country hostage, because the country has a large amount of debt and a large deficit. That debt has been accumulated by both parties, and it exists. > [@](#): > > Also, the reason Republicans are able to hold the country hostage, as you say, is that they are not the minority party in congress. The are the majority party in the House and the minority in the Senate. You could just as easily say that the Democrats are holding the country hostage. I don’t want to get into a political debate, but I think this is actually a question of fact: Democrats aren’t threatening to refuse to raise the debt ceiling. Not a single Democrat has said that. Democrats are happy to vote for a “clean” debt ceiling increase tomorrow if Republicans would go along with it. That’s what Nancy Pelosi has been pushing for for a long time now. It’s the Republican party, and them alone, who have threatened to refuse to raise the debt ceiling unless their demands are met, which is what has created the “hostage” scenario. Granted Democrats are not willing to give in to all of the Republican demands unless they get some concessions in return; but refusing to accede to the hostage-taker’s demands doesn’t make you a hostage-taker yourself. ---
**Author:** ![Sunspace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sunspace/32/1250_2.png) [@Sunspace](https://boards.straightdope.com/u/Sunspace)\ **Post date:** [July 14, 2011, 11:30pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/35 "2011-07-14T23:30:07Z")
> [@furt](#): > > Because everyone knows that there is a _real_ debt ceiling that no one wants to hit. The _real_ debt ceiling is when we’re so far in hock that people lose confidence in us, and stop lending us money. We don’t know where that point is exactly; we may have a ways to go, we may be quite close to it. Nobody knows. But if/when it does arrive, it’ll be very, very ugly. [This Globe and Mail opinion piece](http://www.theglobeandmail.com/news/politics/second-reading/andrew-steele/the-united-states-and-obama-hit-the-ceiling/article2097325/) says that a failure to raise the debt ceiling would essentially result in an erosion of trust in the US’ financial securities, causing higher interest costs. ---
**Author:** ![Elendil\_s\_Heir](https://avatars.discourse-cdn.com/v4/letter/e/7cd45c/32.png) [@Elendil\_s\_Heir](https://boards.straightdope.com/u/Elendil_s_Heir)\ **Post date:** [July 15, 2011, 12:00am UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/36 "2011-07-15T00:00:19Z")
> [@Tom\_Tildrum](#): > > Here’s [one](http://www.thirdway.org/publications/387). Beware, though; it cuts both ways. Thank you. Good to know. ---
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [July 15, 2011, 1:21am UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/37 "2011-07-15T01:21:40Z")
> [@HardlySanguine](#): > > (As a side question, is there somewhere that has a list of the various familiar financial ratios we use to evaluate businesses, as applied to the U.S.?) I’m sure you could find someone who has tried to run these numbers, but I would warn against looking at them. Even thinking that way is a huge mistake. As others have said, governments are just not the same as households or corporations. Comparing apples and oranges can lead to faulty conclusions. One example: US debt exists in the form of Treasury bills. These form the basis of conservative, safe investments around the entire world. A corporation with no debt is in excellent shape, but you could argue that a country with no debt is actually doing a disservice to the investing public. Another example: The government can print money, which effectively changes the value of that money and of all existing debts and assets. While this is generally bad for the country and economy, it’s an option that isn’t available to a corporation or household in any form. A better comparison would be to look at US debt as a % of GDP and compare that to other countries ( [List of countries by government debt - Wikipedia](http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt) ). What you’ll see is that the US is a long way from being Greece. ---
**Author:** ![isaiahrobinson](https://avatars.discourse-cdn.com/v4/letter/i/85e7bf/32.png) [@isaiahrobinson](https://boards.straightdope.com/u/isaiahrobinson)\ **Post date:** [July 15, 2011, 3:55pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/38 "2011-07-15T15:55:51Z")
> [@HardlySanguine](#): > > Is the debt ceiling automatically increased with the inflation rate? It’d be interesting to see, historically, how much beyond yearly inflation the ceiling has been raised. [This](http://www.washingtonpost.com/rf/image_606w/WashingtonPost/Content/Blogs/ezra-klein/StandingArt/debt%20ceiling%20one%20graph.jpg?uuid=VSZ7mK74EeCzBdL-DJ10PA) graph shows when the debt ceiling was raised and by how much. Basically it gets raised by however much it needs to to cover the extra debt the country is taking on. It rocketed way past inflation levels under George W. Bush and Obama because the country has been taking on debt at a much faster than inflation, but for the last few years of the Clinton administration it didn’t get raised at all because the budget went into surplus. Raising it has always just been a formality, until this year. ---
**Author:** ![USCDiver](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/uscdiver/32/354_2.png) [@USCDiver](https://boards.straightdope.com/u/USCDiver)\ **Post date:** [July 15, 2011, 4:13pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/39 "2011-07-15T16:13:09Z")
> [@isaiahrobinson](#): > > [This](http://www.washingtonpost.com/rf/image_606w/WashingtonPost/Content/Blogs/ezra-klein/StandingArt/debt%20ceiling%20one%20graph.jpg?uuid=VSZ7mK74EeCzBdL-DJ10PA) graph shows when the debt ceiling was raised and by how much. Basically it gets raised by however much it needs to to cover the extra debt the country is taking on. It rocketed way past inflation levels under George W. Bush and Obama because the country has been taking on debt at a much faster than inflation, but for the last few years of the Clinton administration it didn’t get raised at all because the budget went into surplus. Raising it has always just been a formality, until this year. FYI: I’m pretty sure that graph has the Senate party in control colors reversed ---
**Author:** ![constanze](https://avatars.discourse-cdn.com/v4/letter/c/f9ae1b/32.png) [@constanze](https://boards.straightdope.com/u/constanze)\ **Post date:** [July 15, 2011, 4:21pm UTC](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017/40 "2011-07-15T16:21:28Z")
> [@Wheelz](#): > > Can someone please tell me how this makes any sense at all? If I’m about to default on a bank loan, can I raise my debt ceiling so that I can put off paying the bank back, and in fact borrow even more? I didn’t think so. How can a country do it? Of course you can. The question is whether the bank accepts it. If the bank thinks “You’re a good customer, we make a lot of money from the high interest rates, the new extension will be even better, and his business is solid, so he won’t default, in fact, he needs the raise of the debt to expand his business” - then they will smile and say “Yes, of course! Here’s the new contract!” If the bank, on the other hand, looks at you and thinks “Well, we made some good money, but now his business is crumbling, he’s laid off his workers - looks he’s going belly-up, no way we’re throwing good money after bad, we want as much as we can get before he’s bankrupt”, then they will say “No way, pay up you deadbeat!” So it depends entirely on how trustworthy you appear to the bank, what your income situation is, and how big a customer you are. You know, like in the old joke: If you owe the bank 100 000 dollars, you can’t sleep at night for worry. If you owe the bank 10 mill. dollars, the bank can’t sleep at night for worry. (I used a hypothetical business and not a private person because a state is more like the former than the latter. Still, even with a private person it’s possible, just less likely.) Most of all it depends on how tight or greedy your bank is: if they want as much profit, they will happily raise the ceiling and extend the deadline against higher interest rates. If the bank is more conservative and worried about defaulting, they will deny. With countries, this happens regularly, too, it just doesn’t get big headlines unless the stakes are high. Most countries have such high debt that they can’t pay it off in one year, anyway, so the debt is rolled over, that is, re-issued. Part of the interest has been paid, maybe some debt paid off; and the remaining debt plus interest is packaged into a new deal with new deadline and new rates. As long as the economy of the country is booming and taxes incoming to pay part of the running interest and pay back a little of the debt itself, the credit givers don’t worry, only if suddenly things crash and the country as a whole could default do the creditors start worrying. The same is happening in Greece: they are in such a bad shape, that they get only short-term credit at sky-high rates, that’s why there’s a conference every couple of months, because the deadline has run out and things haven’t improved. [Previous page](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017.md?page=1) [Next page](https://boards.straightdope.com/t/debt-ceiling-please-explain/589017.md?page=3)