The debt limit (also called the debt ceiling) is established in law and limits the amount of debt that the federal government can issue. If the federal government reaches the debt ceiling and its obligations continue to exceed revenues, it eventually will be unable to make some payments and will face default. According to estimates by the U.S. Department of the Treasury, the government will exceed the debt limit on August 2, 2011.
The Pew Fiscal Analysis Initiative has developed a Q&A fact sheet answering frequently asked questions about the federal debt limit and the consequences of defaulting on the government's obligations.
The Pew Center on the States has released an issue brief titled The Debt Ceiling Debate: How a Federal Default Could Impact States and Cities, which examines how a failure to reach an agreement to raise the federal debt limit would impact cities and states.