Historical Overview of the Debt Ceiling
The debt ceiling is a limit set by the United States Congress on the amount of national debt that can be issued by the Treasury Department. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past. The concept of a debt ceiling has been a part of American politics since the early 20th century, but its history is more complex than many people realize.
Origins of the Debt Ceiling
In 1917, Congress passed the Second Liberty Bond Act, which authorized the Treasury Department to issue bonds to help fund World War I. This law also introduced the concept of a debt ceiling, which was set at $11.5 billion. The idea was to give Congress some control over the amount of debt the government could take on.
At the time, the debt ceiling was largely a symbolic gesture, as the government rarely came close to reaching it. However, this changed in the 1930s, when the Great Depression led to significant increases in government spending. In response, Congress raised the debt ceiling several times, eventually reaching $45 billion in 1940.
The Modern Debt Ceiling
Since 1960, Congress has raised, extended, or revised the debt limit 78 separate times with periodic increases to accommodate new spending programs and economic crises. However, it wasn’t until the 1980s that the debt ceiling became a major political issue.
In 1985, Congress passed the Gramm-Rudman-Hollings Act, which established deficit reduction targets and automatic spending cuts if those targets were not met. This law also raised the debt ceiling to $2.08 trillion. Over the next three decades, the debt ceiling was raised numerous times to accommodate new spending and tax policies.
In 2019, the debt ceiling was suspended until July 31, 2021. The ongoing political debates over the debt ceiling reflect deeper disagreements about the role of government spending in the economy and the appropriate level of taxation.
Current State
As of June 2023, the U.S. national debt was more than $31.4 trillion. Although the debt ceiling was reached in January 2023, the limit was temporarily suspended in a deal that capped spending for two years and placed additional limits on some federal poverty assistance programs.
