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Thomas Kenny

The Debt Ceiling Crisis Gets Kicked Down the Road... Again

By January 23, 2013

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The financial markets received more good news on Wednesday, as the U.S. Congress agreed to suspend the country's debt ceiling (the limit the Treasury is allowed to borrow) until late May. The United States went over the $16.4 trillion limit on December 31, and it has since been operating on stop-gap measures being employed by the Treasury. These measures were set to be exhausted by late February, setting up a crisis similar to that which occurred in August, 2011 unless Congress voted to raise the ceiling.

Congress has now temporarily addressed this issue by suspending the debt ceiling until May 18, allowing the government to continue to fund its operations through borrowing. This leaves time for debate regarding the extent and nature of future spending cuts, but it doesn't solve the key problems. Congress still needs to address the $1.2 trillion in automatic spending cuts set to go into effect on March 1 (the aspect of the fiscal cliff that has yet to be agreed on) and, on a longer-term basis, deal with the nation's growing debt load.

While one of the largest headline risks has been removed for now, stay tuned - we'll be hearing more about the debt ceiling again as the spring approaches.

Learn more: What is the debt ceiling?

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