2011 U.S. Debt Ceiling Crisis

AAA

DEFINITION of '2011 U.S. Debt Ceiling Crisis'

A contentious July 2011 debate regarding the maximum amount of borrowing that the United States government should be allowed to undertake. A debt ceiling has been in place since 1917, but the government raises it whenever it comes close to hitting it. Hitting the debt ceiling would mean defaulting on interest payments to creditors. The consequences of such a default could include late, partial or missed payments to federal pensioners, Social Security and Medicare recipients, government employees and government contractors, as well as an increase in interest rate at which the U.S. could undertake further borrowing. The 2011 U.S. debt ceiling crisis was a heated negotiation over how to avoid potential problems like these.

INVESTOPEDIA EXPLAINS '2011 U.S. Debt Ceiling Crisis'

Congress resolved the debt ceiling crisis when it passed the Budget Control Act of 2011 and decided to immediately raise the debt ceiling by $400 billion, from $14.3 trillion to $14.7 trillion, with the option for additional increases in the coming months. The agreement included $900 billion in spending cuts over the next 10 years and established a special committee to identify additional spending cuts. In the aftermath of the crisis, Standard and Poor's downgraded the United States' credit rating from AAA to AA+ even though the U.S. did not default.

RELATED TERMS
  1. Debt-To-GDP Ratio

    The ratio of a country's national debt to its gross domestic ...
  2. Budget Control Act - BCA

    A federal statue passed by Congress and signed into law by President ...
  3. Debt Ceiling

    The maximum amount of monies the United States can borrow. The ...
  4. Statutory Debt Limit

    A debt limit established under the Second Liberty Bond Act of ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
RELATED FAQS
  1. What are the typical day-to-day responsibilities of a Chief Operating Officer (COO)?

    A country's debt crisis affects the world through a loss of investor confidence and systemic financial instability. A country's ... Read Full Answer >>
  2. What are the pros and cons of operating on a balanced-budget?

    Few issues are more complicated, contentious and controversial in contemporary American politics than balancing the federal ... Read Full Answer >>
  3. Which countries run the largest budget deficits?

    The countries with the largest budget deficits as of March 2015, in order, are Kuwait, Macau, the Republic of Congo, Norway, ... Read Full Answer >>
  4. What country holds the largest negative current account in the world?

    The country that holds the largest negative current account is the United States. According to the CIA's World Factbook, ... Read Full Answer >>
  5. How does a nation's national debt affect the budget process?

    A large national debt generates real fiscal and political consequences on the federal budget and the budget process. Some ... Read Full Answer >>
  6. Which developed country has the most debt?

    One common method for examining a country's government net debt is to calculate the amount in relation to the country’s gross ... Read Full Answer >>
Related Articles
  1. Economics

    Successful Ways That Governments Reduce Federal Debt

    Governments have many options when trying to reduce debt, and throughout history some of them have actually worked.
  2. Bonds & Fixed Income

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  3. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  4. Personal Finance

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  5. Economics

    How Governments Influence Markets

    The biggest influence in the markets today can create some unintended consequences.
  6. Economics

    Would More Government Debt Help The U.S. Economy?

    Many economic policy experts are once again asking: “What, if anything, can be done to accelerate the United States’ persistently soft recovery?”
  7. Economics

    The Top Reasons Behind The U.S. National Debt

    National debt, as with a business, is basically the difference between receipts and expenses--but in the U.S., the latter has far outpaced the former. Why?
  8. Economics

    The U.S. National Spending And Debt

    Just like any average American household, government overspending can carry on for extended periods by rolling over debt and borrowing more and more money in what seems like a never-ending game ...
  9. Economics

    Sovereign Debt Overview

    The national or government debt is a combination of both internal and external debt. The external debt is referred to as Sovereign Debt. Sovereign Debt refers to bonds issued by a nation’s ...
  10. Economics

    What The National Debt Means To You

    The U.S. deficit seems to grow every year. But how does it actually affect you?

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center