Now that we've gotten past the debate over raising the debt ceiling, so the world economy isn't going to hell next week, could someone explain it clearly?
Most news sites describe it by analogy with a credit card limit. But that's not very satisfying to me. When you hit your card limit, the bank won't let you incur any more debt on that card. If you want to buy something on credit, you simply can't. But you haven't defaulted on your previous debts, as long as you keep paying them back on schedule.
But if the US had hit the debt ceiling, we would have started defaulting on payments. The only way I can rationalize that with the above analogy is if we're taking out new loans in order to pay back previous loans. If we run into the limit, we won't be able to take out these new loans, and as a result we won't be able to pay back the old ones.
They also say that we're just paying for things that Congress has already authorized. Does that mean that they're not taking the debt ceiling into account when they budget for the year? I know the Federal government isn't required to have a balanced budget, but I think that just reflects that payments can exceed income (mainly taxes, fees, and tariffs); the natural assumption is that the difference will be made up through loans (government bonds), and they know what the ceiling on that is when making the budget.