Once again, the U.S. government is up against a pair of fiscal deadlines. By midnight, Friday, Dec. 3, 2021, if Congress doesn't act, many programs will lose funding, resulting in a partial government shutdown. Soon after, around Dec. 15, 2021, the country may reach its debt ceiling and no longer be able to borrow money to pay its debt, resulting in default.
Although the U.S. government has periodically come up to these precipices, the potential downside is catastrophic. With no money to pay bills and the inability to borrow to pay down debt, the result can eventually be bankruptcy. To avoid them, Congress has to do something it rarely does these days—agree. In this case, agreement has to be reached on how to fund the government and how to borrow enough money to pay the bills.
The Debt Ceiling
The debt ceiling is not a limit on spending; it's a limit on the ability of the Department of the Treasury to borrow money to pay outstanding debt.
Here we explore the timelines and circumstances surrounding these two major functions of government—spending and borrowing. Some parts of this are simple; others are highly complex.
- The debt ceiling is a limit on the amount of money the government can borrow to pay off existing debt.
- The debt ceiling deadline is the date when that limit is reached.
- Funding or appropriations reflect legislation passed to keep the government running.
- Continuing resolutions keep the government funded on a temporary basis.
- In Oct. 2021, Congress passed a continuing resolution to keep the government running until Dec. 3, 2021, and lifted the debt ceiling by $480 billion, which was expected to be reached by the same date.
- Since then, Treasury Secretary Janet Yellen has revised the debt ceiling deadline to Dec. 15, 2021.
- Failure to address funding can result in a government shutdown.
- Failure to address the debt limit can result in the U.S. defaulting on its debt.
The Appropriations Timeline
Appropriations are part of the 1974 Congressional Budget Act which establishes a process the White House and Congress are expected to follow each fiscal year. The established process is rarely followed on schedule and sometimes parts of it aren't followed at all.
No later than the first Monday in February, for example, the president's budget proposal is due to be submitted to Congress. In actuality, Congress has frequently granted deadline extensions at the request of the president. President Biden submitted his first budget proposal on May 27, 2021, 116 days late. His predecessor, Donald Trump, submitted his first proposal on May 23, 20217, 106 days after it was due.
By April 15, the House and Senate are expected to adopt their own budget resolution, which sets the overall spending plan for the upcoming fiscal year. In fact, Congress frequently misses the April 15 target and sometimes fails to pass a budget resolution at all.
In the absence of a budget resolution, Congress typically enacts "deeming resolutions," which provide spending allocations to the various Appropriations Committees. If a deeming resolution isn't agreed to, the most recently agreed to spending allocations remain in effect.
Oct. 1 marks the beginning of the fiscal year and the date by which Congress must pass a series of 12 separate appropriations bills funding the agencies and activities of government. Truth be told, since 1997, Congress has never passed more than a third of its regular funding bills by the deadline. Instead, it relies on continuing resolutions (CRs), which extend previous funding levels for existing programs.
The December 3 Appropriations Deadline
By midnight, Friday, Dec. 3, 2021, if Congress does not act, the continuing resolution to keep the lights on and fund the government that passed Sept. 30, 2021, will expire and, with it, funding for many government programs and activities.
Recall that by Oct. 1, Congress should have passed a budget resolution. It did not and here we are. It's highly unlikely lawmakers will advance an all-encompassing budget by Friday. The most likely outcome will be another "kick the can down the road" continuing resolution providing funding for anywhere from a few days to several months, according to reporting by CQ Roll Call.
This could be followed by more CRs—each creating a potential government shutdown if not renewed—or an omnibus budget bill through the end of the fiscal year. However it goes, the upcoming Dec. 3 deadline is likely not the last funding deadline Congress will face in the coming months.
The Debt Ceiling Timeline
The U.S. government debt ceiling, also called the debt limit, was first enacted in 1917 to simplify the previous process of requiring approval for each individual issuance of debt and to enhance borrowing flexibility. The debt ceiling isn't part of the budgeting process that controls future spending, but rather a mechanism designed to help control the national debt or funds that have already been expended.
Over time, Congress has passed numerous budget acts and other legislation to either raise or suspend the debt ceiling. In recent years, the Bipartisan Budget Act of 2018 suspended the debt ceiling through March 2019, then effectively raised it to $22 trillion. This was followed by the Bipartisan Budget Act of 2019, which suspended the debt limit through July 31, 2021, following which the new debt ceiling was set at about $28.4 trillion.
When the national debt gets close to the debt ceiling, Treasury is empowered to enact what are known as "extraordinary measures" to shift funds around in order to meet financial obligations,
Prior to this, on July 23, 2021, Treasury Secretary Janet Yellen informed Congress that the statutory debt limit of $28.4 trillion would be reached Aug. 1, 2021, and that, because of this, Treasury would be enacting "extraordinary measures" to allow the government to continue borrowing funds.
Then, on Oct. 14, 2021, Congress passed legislation increasing the debt limit by $480 billion. On Oct. 18, 2021, Secretary Yellen informed Congress that the additional funding, along with "extraordinary measures" would allow Treasury to satisfy all obligations through Dec. 3, 2021. In a subsequent letter, Yellen revised the date to Dec. 15, 2021.
The Dec. 15 Debt Ceiling Deadline
That second upcoming deadline, Dec. 15, 2021, is potentially the most serious of all. Failure to act on the part of Congress could result in the collapse of the full faith and credit of the United States of America as the nation begins to default on its financial obligations.
To address this potential catastrophe, Congress has three options—extraordinary measures, raise the debt ceiling as it did on Oct. 14, 2021, or suspend the debt ceiling as it did in August 2019. According to Treasury Secretary Yellen, additional extraordinary measures are unreliable at best due to the uncertain nature of our national debt.
This leaves the other two options as temporary measures until a more suitable long-term solution can be found. Given current Congressional rancor, a bipartisan solution will be difficult to achieve. This is especially true when both budgetary debates and debt-ceiling disagreements become weaponized in attempts to win concessions.
What Happens if Congress Stops Raising or Suspending the Debt Limit?
Once the debt limit is reached, the Treasury Department can no longer borrow money to pay outstanding debt. Ultimately this could result in the United States of America defaulting on its debt, which most expert suggest would be a fiscal crisis.
Could the United States Simply Do Away With the Debt Ceiling?
While it might be theoretically possible, those who have studied the matter suggest there are constitutional, legal, and procedural barriers that may prevent this type of action.
When Does the Federal Government's Fiscal Year Begin and End?
The U.S. fiscal year begins Oct. 1 and ends Sept. 30 of the following year.