What you need to know about the debt ceiling

Until recently, the markets largely ignored the political jockeying over whether to raise the federal debt ceiling, figuring there's no way Congress would purposely default on the nation's obligations and potentially throw the U.S. economy into another recession.

But as the Oct. 17th deadline approaches with no resolution in sight, markets are getting nervous.

Rates on Treasury bills have been rising. The Dow Jones industrial average gave up 296 points, or nearly 2 percent, early this week, but rose slightly Wednesday with the nomination of Janet Yellen to lead the Federal Reserve.

Wall Street and corporate CEOs are speaking out against using the debt ceiling as a ploy to score political concessions.

"It ought to be banned as a weapon," billionaire investor Warren Buffett told Fortune. "It should be like nuclear bombs, basically too horrible to use."

The debt ceiling has been part of this country's financial management for nearly a century. For years, it was lifted without much debate, but critics sometimes used the occasion to complain about the nation's spending. Only in the past few years have some seriously threatened not to raise the limit as a political bargaining chip.

As the countdown to default continues, here's what you need to know:

What is the debt ceiling?

For years, the federal government has spent more than it takes in from taxes. To cover this annual shortfall, Uncle Sam raises money through the sale of Treasury bonds. The accumulation of these budget deficits year after year is the national debt.

Congress has set a limit — the debt ceiling — on how much the government may borrow since 1917. Before then, lawmakers had to approve each time the government issued bonds. With the onset of World War I and paying for it, the debt ceiling was created to give the Treasury more flexibility in managing finances, according to the Congressional Research Service.

The debt ceiling is now $16.7 trillion. That limit was reached in May, but the Treasury Department took what it calls "extraordinary measures" to keep up with the nation's bills.

But those maneuvers will be exhausted by Oct. 17th, by which time the government will have only $30 billion on hand to pay expenses that can be as high as $60 billion on certain days, Treasury Secretary Jack Lew told Congress in a letter this month.

"If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," Lew said.

How high must the ceiling be raised?

That depends on lawmakers. If Congress wants to postpone another debt ceiling showdown until the end of next year — after the November elections — the debt limit would have to be raised by about $1.1 trillion, said Loren Adler, research director for the nonpartisan nonprofit Committee for a Responsible Federal Budget.

How many times has the debt ceiling been raised?

Almost 100 times, with some being short-term extensions while lawmakers negotiate bigger budget compromises. In 1990, for instance, the debt ceiling was temporarily raised six times before lawmakers agreed on a deficit-reduction bill along with a permanent increase in the debt ceiling, Adler said.

Does raising the debt ceiling increase spending?

No. Raising the debt ceiling only allows Uncle Sam to borrow the money needed to pay its obligations that Congress has already approved.

Not raising the ceiling is "like going into a restaurant and ordering a meal and then at the end saying you're not going to pay for it," said Curt Grimm, a professor of economics and strategy at the University of Maryland, College Park.