What is the debt ceiling?
The debt ceiling is the maximum amount of debt that the government is legally allowed to take on. Whereas Congress used to approve each federal debt issuance separately, in 1917 it passed the Second Liberty Bond Act, which limited the amount of debt the Treasury can issue but also provided it with more leeway. The Treasury was granted the authority to issue enough debt to fund government operations as long as it didn't exceed the debt ceiling. The ceiling can be raised, however, with Congress' approval.
What's the significance?
This legal constraint could mean shutting down the government and the economy. The run-up of US debt in the wake of the financial crisis means that the government is close to hitting that limit. Bond investors are estimating it could hit the legal limit, $14.3 trillion, as early as March or April of 2011. With Republicans now in control of the House and with larger ranks in the Senate, some are worried that they will refuse to approve raising the ceiling. This would force the government to default and could have catastrophic consequences, including a stop in its payments to all government services and a permanent loss in confidence in Treasury debt.
Who's talking about it?
Mike Konczal worries that without having addressed the debt ceiling in the tax cut deal, Democrats have opened the door for the GOP to ram through austerity measures...Marshall Auerback is concerned that President Obama won't be able to do anything to stop this crisis from occurring...Bill Black thinks that the GOP's bluff on the debt ceiling is really an attack on programs like Social Security...Ezra Klein points out that more is at stake than just a government shutdown -- it's about the full faith of the US government...Annie Lowrey gets into the nitty gritty of what a failure to raise the ceiling would mean...Austan Goolsbee has said that this "would be the first default in history caused purely by insanity" and Tim Geithner sent a letter to Congress urging them to increase the limit...David Weigel predicts that the GOP will use this "fiscal apocalypse" to get spending concessions...David Min calls a freeze on the debt ceiling "sheer idiocy."