The debt limit—commonly called the debt ceiling—is the maximum amount of debt that the Department of the Treasury can issue to the public or to other federal agencies. The amount is set by law and has been increased or suspended over the years to allow for the additional borrowing needed to finance the government's operations.

On June 3, 2023, lawmakers suspended the debt limit through January 1, 2025. On January 2, 2025, that limit was reinstated at $36.1 trillion—the amount of debt outstanding on the previous day. At that time, a scheduled redemption of securities held by a Medicare trust fund lowered outstanding debt by $54 billion, giving the Treasury room for additional borrowing. That redemption forestalled the beginning of a "debt issuance suspension period" until January 21, 2025. During such a period, the Treasury can pause investments in the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (PSRHBF) to free up room to borrow additional funds without breaching the debt ceiling. In addition, other well-established "extraordinary measures" are available to the Treasury to supplement cash balances and finance ongoing government operations.

The Congressional Budget Office estimates that if the debt limit remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025. The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from CBO's projections. If the government's borrowing needs are significantly greater than CBO projects, the Treasury's resources could be exhausted in late May or sometime in June, before tax payments due in mid-June are received or before additional extraordinary measures become available on June 30. Conversely, if borrowing needs fall short of the amounts in CBO's projections, the extraordinary measures will permit the Treasury to continue financing government activities longer than expected.

If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government will be unable to pay all of its obligations. As a result, it would have to delay making payments for some activities, default on its debt obligations, or both.