The US has hit the debt ceiling, what next?

The US has hit its debt limit, with the Treasury Department now taking measures to prevent a potentially devastating default.

Reaching the debt ceiling means the government is not allowed to borrow any more money - unless Congress agrees to suspend or change the cap, which currently stands at almost $31.4trillion(Sh4,300 trillion).Typically that is what happens.  Since 1960, politicians have moved to raise, extend or revise the definition of the debt limit 78 times - including three just in the last six months.

But fresh tensions in Congress, where Republicans recently took control of the House of Representatives and are calling for spending cuts, have raised concerns that politicians will delay acting this time - potentially leading the US to intentionally default for the first time in its history. So what would happen?

What will the US do now?

For most of us, the impact should be barely noticeable - at least in the first few months. The US Treasury can manage the situation by taking measures to avoid actually breaching the limit.

In the past, this has included steps such as suspending investments it is supposed to make into retirement and health benefit funds for federal employees - then retopping those funds at a later date.

Treasury Secretary Janet Yellen told Congress in January that she would be taking those kinds of actions.

But even delays do have a real price.

The stand-off on the issue in 2011 prompted the S&P credit ratings agency to downgrade the country’s rating - a first for the US.

Government analysts have estimated that delays that year caused the cost of borrowing for the US Treasury to increase by at least $1.3bn, as investors demanded higher rates due to the uncertainty.