The US is the only major sovereign currency issuer to have a “debt limit” enacted in law. It is simply a number that the Congress uses to leverage their spending priorities between parties and branches of government. Because the Treasury can simply ask the Federal Reserve for all the money it needs to meet its obligations, it can never default on its obligations.
Expanding the money supply through government spending can create price inflation but there is no upper limit to its “debt” as we have seen from the trillions that were added during the pandemic. The Federal government doesn’t actually need taxes to “pay off” its debt because they created all the money that pays the taxes in the first place. It’s just a matter of whose pockets the money is in at any time, public pockets or government bank reserves.
Appreciate the reply. My question is can the house now refuse to raise the limit without cuts from the authorized omnibus spending, like the 87000 IRS hires for example? By not passing a debt limit increase, do we somehow regain power of the purse, through a spending freeze or otherwise?