ST. LOUIS – The debt ceiling was created during World War I, with Congress passing the Second Liberty Bond Act of 1917. The debt ceiling limits how much the government can borrow to fund federal operations.

Treasury Secretary Janet Yellen says she must now resort to “extraordinary measures” to keep paying the nation’s bills, as lawmakers figure out a deal to avoid a default.

On Thursday, Jan. 19, the U.S. hit its debt limit of $31.4 trillion. The number may be unfathomable, but this is not uncharted territory. In December 2021, Congress voted to raise the debt ceiling and avoid defaulting on the government’s debt.

Marcus Painter, an assistant professor of finance at Saint Louis University, points to 2011, when political brinkmanship nearly led the U.S. to default on its debt.

“The S&P Global, one of the credit rating agencies, actually downgraded the U.S.’s debt,” he said. “That has real impacts on how much it costs the U.S. to issue more debt in the future.”

Secretary Yellen says she can sell off investments or suspend reinvestment in government retirement funds, but that would only put off the crisis until June.

“One of the reasons it’s a problem is that a lot of people will use the impending debt ceiling as a bargaining chip,” Painter said. “I think we’re basically just going to have to suffer through some of this political posturing and virtue signaling before they finally come to a deal and, ultimately, they’ll likely just raise the debt ceiling once again.”

This is going to be one of the first real tests to see if the White House and Republicans, who now control the House, can reach some kind of agreement. Experts say a default could lead to a stock market crash, a recession, and mass layoffs.