Welcome to the Dispatch Podcast. I'm your host, Price Sank Claire. I'm a domestic policy reporter for the Dispatch.

And today we've got an explainer podcast on the debt ceiling, what it is, how we got here, and where the current negotiations between

Speaker McCarthy and President Biden stand. My guest today is Ben Ritz, who is the director of the Center for Funding America's Future at the Center Left Progressive Policy Institute.

He's been working on budget issues since 2011, and I have found him to be a helpful guide for all things related to the debt.

Ben, thanks for joining us on the Dispatch Podcast. Thanks for having me. So I wanted to start. I've written a couple articles on the debt ceiling. You've been a helpful source for me, but for people who are new to this this week, you know, why do we have a debt ceiling?

And I know it's a fairly unique thing that not a lot of countries have. So why do we have it? But then why do other countries not have it?

Sure. So historically, it used to be the case that any time Congress, any time the federal government needed to borrow money, Congress would vote on each instance of borrowing. And so they would vote to issue bonds.

And as the national needs that became more frequent, they changed the law so that instead of them needing to vote every time there was a bond issue, they would say we passed this amount of spending, this amount of revenue.

And the President can borrow, the Treasury can borrow as much money as it needs to fill those needs up to a certain point. That point is the debt ceiling or the debt limit, depending on the source you're reading.

But it's the same thing. And the reason that most other countries don't have this is because even though this system makes a little more sense than what we had originally, it still doesn't make a whole lot of sense.

And Congress is going to pass a series of spending bills and then a series of revenue bills. And the revenue they raised does not cover the amount they want to spend.

Then it makes sense that the federal government needs to borrow the money to fill the difference, having a separate vote for whether you are going to actually do that borrowing or whether you're going to pay the bills that you've already passed doesn't make a whole lot of sense.

And it can lead to this situation. We're in this week where if we were to go across the X state, which I'll ask you out in a moment, and to actually go into default on the national debt, you know, no one really knows what would happen, but the President would be forced to break at least some laws because he's either breaking the debt limit law or the law that says you have to spend this money that Congress has appropriated.

Exactly. So yeah, with that in mind, Republicans and Democrats have been having these negotiations for a couple of weeks now trying to avoid the so-called X state, which the Treasury Secretary Janet Yellen has said it could be as early as June 1st.

So we know what the debt limit is, but what is the X state and why is it sort of fuzzy and hard to predict with certainty at this point?

So the important thing to keep in mind is that June 1st is not the date we hit the debt ceiling. We actually hit the debt ceiling earlier this year.

But what happens when we hit the debt ceiling is that instead of continuing to issue new debt, what the Treasury will do is what's called extraordinary measures, which is a way of saying that they're doing accounting changes by postponing payments into certain funds

and reallocating money that allows them to continue paying the bills without missing payments and without incurring more debt subject to the limit.

But the problem is that those only work for a certain amount of time and then you run out of money and those more flexible accounts.

And we don't actually know the exact date we run out of that money because it is heavily determined by cash flow.

If a payment comes in on a certain date, our tax payments coming in faster or higher than in previous years or slower and lower.

And so we get a little more clarity as we get closer to the date, but we don't actually know is this going to be the date where we don't have enough money because if you get enough tax payments and bills come in late enough,

...