• By
  • Damian Paletta
The Capitol building stands at dusk on Jan. 28, 2014. (Pete Marovich/Bloomberg)
Bloomberg News

Congress now routinely deals with the debt ceiling the same way a high school principal deals with a troublemaker – suspension.

The government can only borrow money up to a certain limit set by Congress, a level known as the debt ceiling. Congress in years past has voted to “raise” the debt ceiling, maybe by $400 billion or $800 billion or so, a level that used to be able to buy the government plenty of time to pay its bills before the measure had to be revisited.

The last time the debt ceiling was raised in this manner was in 2011, during the big debt ceiling showdown between the White House and Congress. The debt ceiling was essentially raised (it was done in multiple steps) $2.1 trillion after that vote, a sum that gave Treasury until February 2013 before it said it needed to be raised again.

Congress then began a steady process of “suspending” the debt ceiling instead of actually raising it. It suspended the debt ceiling until May 2013, which allowed Treasury to use emergency measures to continue borrowing money until October. Then, in October, Congress “suspended” the debt ceiling until this month. Now, Congress is in the process of “suspending” the debt ceiling until March 2015.

Suspending the debt ceiling, as opposed to raising it, accomplishes several things. First, lawmakers can say they didn’t technically “raise” the debt ceiling. This might seem like semantics, but elections are often won or lost on semantics such as these. And second, it creates a more predictable timeframe for when these fiscal battles will take place.

In previous years, the next debt ceiling battle depended more on the government’s deficit and less on the fiscal calendar. By “suspending” the debt ceiling until March 2015, Congress is essentially punting their next vote on the matter until sometime in mid-to-late 2015, assuming Treasury will delay the process as long as possible.

So what does a “suspension” actually mean? In August 2011, Congress effectively voted to raise the debt ceiling to $16.393 trillion. In February 2013, they suspended the debt ceiling until May 19, 2013.

Once that “suspension” expired, the debt ceiling was increased automatically to $16.699 trillion. That might seem like an odd amount, but it’s an amount that represents the debt Treasury issued between February and May 19 to pay its bills. Fast forward a few more suspensions, and the current debt ceiling is $17.212 trillion – all that without a single vote to “raise” the debt ceiling.

This raises a question: Couldn’t the Treasury Department just exploit this “suspension” business by issuing a tremendous amount of debt while the debt limit is suspended? No. Treasury can only issue debt during a suspension to pay for obligations incurred during that suspension.

This is Congress’s way of retaining the pen on the government’s checkbook. That means once the suspension is over, and Treasury uses “emergency” measures to extend borrowing for another few months, Congress must address the matter all over again.

In this case, if the Senate follows the House vote, we’ll be talking about the debt limit again sometime next spring.

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