How the Debt Ceiling Impacts Your Finances

If Congress doesn’t raise the debt ceiling soon, the U.S. could default, sending borrowing costs higher and possibly delaying Social Security payments.

A caution sign reads "National Debt Ceiling" against the backdrop of a stormy sky.
(Image credit: Getty Images)

One of the basics of finance is that U.S. government securities represent a “risk-free” rate of return, but unless Congress and the White House can hammer out a deal to raise the debt ceiling, we may be heading for a historic default by June 1, according to Treasury Secretary Janet Yellen. If that happens, what impact can you expect on your own finances?

First, what is the debt ceiling? Federal law caps how much national debt the U.S. Treasury can issue in the form of securities such as Treasury bills, bonds and notes to pay its bills. Once that debt limit, or debt ceiling, is reached, the U.S. government cannot borrow more until Congress raises the cap. That means that, under current rules, there soon won’t be enough cash to make upcoming interest payments on the existing debt.

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Charles Lewis Sizemore, CFA
Contributing Writer,

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.