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History of the United States debt ceiling

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The history of the United States debt ceiling deals with movements in the United States debt ceiling since it was created in 1917. Management of the United States public debt is an important part of the macroeconomics of the United States economy and finance system, and the debt ceiling is a limitation on the federal government's ability to manage the economy and finance system. The debt ceiling is also a limitation on the federal government's ability to finance government operations, and the failure of Congress to authorize an increase in the debt ceiling has resulted in crises, especially in recent years.

Overview

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A statutorily imposed debt ceiling has been in effect since 1917 when the US Congress passed the Second Liberty Bond Act. Before 1917 there was no debt ceiling in force, but there were parliamentary procedural limitations on the amount of debt that could be issued by the government.

Except for about a year during 1835–1836, the United States has continuously had a fluctuating public debt since the US Constitution legally went into effect on March 4, 1789. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly report on the amount of the debt ($75,463,476.52 on January 1, 1791[1]). The national debt, as expressed in absolute dollars, has increased under every presidential administration since Herbert Hoover.

Early history

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Prior to 1917, the United States did not have a debt ceiling, with Congress either authorizing specific loans or allowing the Treasury to issue certain debt instruments and individual debt issues for specific purposes. Sometimes Congress gave the Treasury discretion over what type of debt instrument would be issued.[2]

Between 1788 and 1917, Congress would authorize each bond issued by the United States Treasury by passing a legislative act that approved the issue and the amount.

In 1917, during World War I, Congress created the debt ceiling with the Second Liberty Bond Act of 1917, which allowed the Treasury to issue bonds and take on other debt without specific Congressional approval, as long as the total debt fell under the statutory debt ceiling. The 1917 legislation set limits on the aggregate amount of debt that could be accumulated through individual categories of debt (such as bonds and bills).

Public Debt Acts

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In 1939, Congress instituted the first limit on total accumulated debt over all kinds of instruments.[3] The debt ceiling, in which an aggregate limit is applied to nearly all federal debt, was substantially established by Public Debt Acts[4][5] passed in 1939 and 1941 and subsequently amended. The United States Public Debt Act of 1939 eliminated separate limits on different types of debt.[6] The Public Debt Act of 1941 raised the aggregate debt limit on all obligations to $65 billion, and consolidated nearly all federal borrowing under the U.S. Treasury and eliminated the tax-exemption of interest and profit on government debt.[6][7]

Subsequent Public Debt Acts amended the aggregate debt limit: the 1942, 1943, 1944, and 1945 acts raised the limit to $125 billion, $210 billion, $260 billion, and $300 billion respectively.[6] In 1946, the Public Debt Act was amended to reduce the debt limit to $275 billion.[6] The limit stayed unchanged until 1954, the Korean War being financed through taxation.[8] The U.S. Treasury nearly hit the debt ceiling in fall 1953, plus the Senate refused to raise it until summer 1954, but the federal government managed to avoid reaching it through using various measures, such as monetizing leftover gold.[9]

A feature of the Public Debt Acts, unlike the 1919 Victory Liberty Bond Act which financed American costs in the First World War, was that the new ceiling was set about 10% above the actual federal debt at the time.[8]

1970s

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Prior to the Budget and Impoundment Control Act of 1974, the debt ceiling played an important role since Congress had few opportunities to hold hearings and debates on the budget.[10] James Surowiecki argued that the debt ceiling lost its usefulness after these reforms to the budget process.[11]

In 1979, noting the potential problems of hitting a default, Dick Gephardt (Rep, D-MO) imposed the "Gephardt Rule," a parliamentary rule that deemed the debt ceiling raised when a budget was passed. This resolved the contradiction in voting for appropriations but not voting to fund them. The rule stood until it was repealed by Congress in 1995.[12]

Number of requests for increase

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Depending on who is doing the research, it is said that the US has raised its debt ceiling (in some form or other) at least 90 times in the 20th century.[13]

The debt ceiling was raised 74 times from March 1962 to May 2011,[14] including 18 times under Ronald Reagan, eight times under Bill Clinton, and seven times under George W. Bush.

Congress has raised the debt ceiling 14 times from 2001 to 2016. The debt ceiling was raised a total of 7 times (total increase of $5365bil) during Pres. Bush's eight-year term and it was raised 11 times (as of 03/2015 a total increase of $6498bil) during Pres. Obama's eight years in office.

1995 debt ceiling crisis

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Main article: 1995–1996 United States federal government shutdowns

The 1995 request for a debt ceiling increase led to debate in Congress on reduction of the size of the federal government, which led to the non-passage of the federal budget, and the United States federal government shutdown of 1995–96. The ceiling was eventually increased and the government shutdown resolved.[15][16]

2011 debt ceiling crisis

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Main article: 2011 United States debt-ceiling crisis

In 2011, Republicans in Congress used the debt ceiling as leverage for deficit reduction because of the lack of Congressional normal order for fiscal year budget votes on the chamber floors and subsequent conference reconciliations between the House and the Senate for final budgets. The credit downgrade and debt ceiling debacle contributed to the Dow Jones Industrial Average falling 2,000 points in late July and August. Following the downgrade itself, the DJIA had one of its worst days in history and fell 635 points on August 8.[17] The GAO estimated that the delay in raising the debt ceiling raised borrowing costs for the government by $1.3 billion (~$1.74 billion in 2023) in 2011 and noted that the delay would also raise costs in later years. The Bipartisan Policy Center extended the GAO's estimates and found that the delay raised borrowing costs by $18.9 billion over ten years.[18]

2013 debt ceiling crisis

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Main article: 2013 United States debt-ceiling crisis

Following the increase in the debt ceiling to $16.394 trillion in 2011,[19] the United States again reached the debt ceiling on December 31, 2012, and the Treasury began taking extraordinary measures. The fiscal cliff was resolved with the passage of the American Taxpayer Relief Act of 2012 (ATRA), but no action was taken on the debt ceiling. With the ATRA tax cuts, the government indicated that the debt ceiling needed to raise by $700 billion (~$903 billion in 2023) for it to continue financing operations for the rest of the 2013 fiscal year[20] and that extraordinary measures were expected to be exhausted by February 15.[21] Treasury has said it is not set up to prioritize payments, and it's not clear that it would be legal to do so. Given this situation, Treasury would simply delay payments if funds could not be raised through extraordinary measures and the debt ceiling had not been raised. This would put a freeze on 7% of the nation's GDP, a contraction greater than the Great Recession. The economic damage would worsen as recipients of social security benefits, government contracts, and other government payments cut back on spending in response to having the freeze in their revenue.[22]

The No Budget, No Pay Act of 2013 suspended the debt ceiling from February 4, 2013, until May 19, 2013. On May 19, the debt ceiling was formally raised to approximately $16.699 trillion to accommodate the borrowing done during the suspension period. However, after the end of the suspension, the ceiling was raised only to the actual debt at that time, and Treasury needed to activate extraordinary measures to avoid a default. With the impacts of the American Taxpayer Relief Act of 2012 tax increases on those who make $400,000 per year, the 2013 sequester, and a $60 billion payment from Fannie Mae and Freddie Mac that reached the Treasury on June 28, 2013, the extraordinary measures were predicted to last until October 17 by the Treasury,[23] but financial firms suggested funds might have lasted a little longer. Jefferies Group said extraordinary measures might have lasted until the end of October while Credit Suisse estimated mid-November.[24]

The US Treasury began taking extraordinary measures to enable payments, and stated that it would delay payments if funds could not be raised through extraordinary measures, and the debt ceiling was not raised. During the crisis, approval ratings for the Republican Party declined.[25]

2021 debt ceiling crisis

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Following the July 2021 expiration of the debt ceiling suspension, the U.S. Treasury began taking "extraordinary measures" which were set to expire around October 18.[26] Senate Republicans blocked attempts to raise the ceiling using the filibuster, insisting that Democrats should act on their own and use reconciliation to raise the limit.[27] The Senate voted to raise it on October 7, 2021, but only to grant the U.S. Treasury authority to borrow money until that December. That month, Congress voted to increase it by $2.5 (~$2.77 trillion in 2023) trillion, which President Biden signed into effect on December 16, 2021.[28] At that point, it was set at about $31.4 trillion.[29]

2023 debt ceiling crisis

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Main article: 2023 United States debt-ceiling crisis

On January 19, 2023, the United States again reached the debt ceiling.[30][31] President Biden at first refused to negotiate, instead insisting on a clean debt ceiling raise. Many news outlets and pundits have talked about this leading to a significant risk that the US defaults on its obligations,[32] though default is not the only possible outcome of the debt ceiling not being raised, the alternative being shutting down portions of government operations.[33] The Treasury has, however, explicitly stated that this would be technically impossible.[34] Many news outlets have also claimed that the federal government has not defaulted on financial obligations before, including President Biden calling such a situation "unprecedented", however a more accurate statement is that the US has defaulted on obligations several times in history, but never because of the debt ceiling. These included late interest payments in 1814 due to the financial strain of the War of 1812 (the last time the US experienced a “major default on its financial obligations"), and briefly in 1979, due to technical glitches.[35]

Historical debt ceiling levels

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Note that this table does not go back to 1917 when the debt ceiling started.

Table of historical debt ceiling levels[36]
Date Debt Ceiling
(billions of dollars)		 Change in Debt Ceiling
(billions of dollars)		 Statute
June 25, 1940 49[37]
February 19, 1941 65 +16
March 28, 1942 125 +60
April 11, 1943 210 +85
June 9, 1944 260 +50
April 3, 1945 300 +40
June 26, 1946 275 −25
August 28, 1954 281 +6
July 9, 1956 275 −6
February 26, 1958 280 +5
September 2, 1958 288 +8
June 30, 1959 295 +7
June 30, 1960 293 −2
June 30, 1961 298[38] +5
July 1, 1962 308 +10
March 31, 1963 305 −3
June 25, 1963 300 −5
June 30, 1963 307 +7
August 31, 1963 309 +2
November 26, 1963 315 +6
June 29, 1964 324 +9
June 24, 1965 328 +4
June 24, 1966 330 +2
March 2, 1967 336 +6
June 30, 1967 358 +22
June 1, 1968 365 +7
April 7, 1969 377 +12
June 30, 1970 395 +18
March 17, 1971 430 +35
March 15, 1972 450[39] +20
October 27, 1972 465 +15
June 30, 1974 495 +30
February 19, 1975 577 +82
November 14, 1975 595 +18
March 15, 1976 627 +32
June 30, 1976 636 +9
September 30, 1976 682 +46
April 1, 1977 700 +18
October 4, 1977 752 +52
August 3, 1978 798 +46
April 2, 1979 830 +32
September 29, 1979 879[40] +49
June 28, 1980 925 +46
December 19, 1980 935 +10
February 7, 1981 985 +50
September 30, 1981 1,079 +94
June 28, 1982 1,143 +64
September 30, 1982 1,290 +147
May 26, 1983 1,389 +99 Pub. L. 98–34
November 21, 1983 1,490 +101 Pub. L. 98–161
May 25, 1984 1,520 +30
June 6, 1984 1,573 +53 Pub. L. 98–342
October 13, 1984 1,823 +250 Pub. L. 98–475
November 14, 1985 1,904 +81
December 12, 1985 2,079 +175 Pub. L. 99–177
August 21, 1986 2,111 +32 Pub. L. 99–384
October 21, 1986 2,300 +189
May 15, 1987 2,320[41] +20
August 10, 1987 2,352 +32
September 29, 1987 2,800 +448 Pub. L. 100–119
August 7, 1989 2,870 +70
November 8, 1989 3,123 +253 Pub. L. 101–140
August 9, 1990 3,195 +72
October 28, 1990 3,230 +35
November 5, 1990 4,145 +915 Pub. L. 101–508
April 6, 1993 4,370 +225
August 10, 1993 4,900 +530 Pub. L. 103–66
March 29, 1996 5,500 +600 Pub. L. 104–121 (text) (PDF)
August 5, 1997 5,950 +450 Pub. L. 105–33 (text) (PDF)
June 11, 2002 6,400[42] +450 Pub. L. 107–199 (text) (PDF)
May 27, 2003 7,384 +984 Pub. L. 108–24 (text) (PDF)
November 16, 2004 8,184[42] +800 Pub. L. 108–415 (text) (PDF)
March 20, 2006 8,965[43] +781 Pub. L. 109–182 (text) (PDF)
September 29, 2007 9,815 +850 Pub. L. 110–91 (text) (PDF)
June 5, 2008 10,615 +800 Pub. L. 110–289 (text) (PDF)
October 3, 2008 11,315[44] +700 Pub. L. 110–343 (text) (PDF)
February 17, 2009 12,104[45] +789 Pub. L. 111–5 (text) (PDF)
December 24, 2009 12,394 +290 Pub. L. 111–123 (text) (PDF)
February 12, 2010 14,294 +1,900 Pub. L. 111–139 (text) (PDF)
January 30, 2012 16,394 +2,100 Pub. L. 112–25 (text) (PDF)
February 4, 2013 Suspended
May 19, 2013 16,699 +305 Pub. L. 113–3 (text) (PDF)
October 17, 2013 Suspended
February 7, 2014 17,212
and auto-adjust 		+213 Pub. L. 113–83 (text) (PDF)
March 15, 2015 18,113
End of auto adjust 		+901 Pub. L. 113–83 (text) (PDF)
October 30, 2015 Suspended[46] Pub. L. 114–74 (text) (PDF)
March 15, 2017 19,847 (de facto) +1,734 [n 1]
September 8, 2017 Suspended [n 2] Pub. L. 115–56 (text) (PDF)

Pub. L. 115–123 (text) (PDF)

March 1, 2019 22,030 (de facto) +2,183 [47]
August 2, 2019 Suspended [n 3] Pub. L. 116–37 (text) (PDF)[48]
July 31, 2021 28,500 (de facto) +6,470 [49]
October 14, 2021 28,900 +480 Pub. L. 117–50 (text) (PDF)[50]
December 16, 2021 31,400 +2,500 Pub. L. 117–73 (text) (PDF)[51]
June 3, 2023 Suspended[n 4] [52][53]

Reference for values between 1993 and 2015:[54]

Note that:

  1. The figures are unadjusted for the time value of money, such as interest and inflation and the size of the economy that generated a debt.
  2. The debt ceiling is an aggregate of gross debt, which includes debt in hands of public and in intragovernment accounts.
  3. The debt ceiling does not necessarily reflect the level of actual debt.
  4. From March 15 to October 30, 2015 there was a de facto debt limit of $18.153 trillion,[55] due to use of extraordinary measures.

Notes

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  1. ^ No official ceiling published. The debt on March 15, 2017 was $19.846 trillion after reaching an all time high of $19.977 trillion on December 30, 2016. See the US government database on the debt.
  2. ^ The debt rose to over $20.1 trillion on September 8, 2017, when the bill to continue the debt limit suspension for fiscal 2018 was passed. The fiscal year started at over $20.3 trillion of debt. US government database on the debt.
  3. ^ The debt rose to over $22.31 trillion on August 2, 2019. US government database on the debt; Archived 2020-08-01 at the Wayback Machine.
  4. ^ Until January 1, 2025.

References

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  1. ^ "Historical Debt Outstanding - Annual 1790 - 1849". U.S. Treasury.
  2. ^ Austin 2008, p. 2.
  3. ^ Austin 2008, p. 2-3.
  4. ^ "Public Debt Acts: Major Acts of Congress". Enotes.com. Retrieved 2011-08-07.
  5. ^ "A Brief History of the U.S. Federal Debt Limit". Freegovreports.com. 2010-01-28. Archived from the original on 2011-08-16. Retrieved 2011-08-07.
  6. ^ a b c d McCaffery, Edward J. "Major Acts of Congress: Public Debt Acts". E-Notes.
  7. ^ USLegal
  8. ^ a b CRS Report for Congress
  9. ^ Garbade, Kenneth (June 2016). "The First Debt Ceiling Crisis" (PDF). Federal Reserve Bank of New York. Archived (PDF) from the original on December 30, 2016. Retrieved January 22, 2023.
  10. ^ Kowalcky & LeLoup 1993, p. 14.
  11. ^ Surowiecki 2011.
  12. ^ Green 2011.
  13. ^ "U.S. National Debt Tops Debt Limit". CBS News. December 19, 2009. Retrieved October 16, 2013.
  14. ^ Sahadi, Jeanne (May 18, 2011). "Debt ceiling FAQs: What you need to know". CNN. Retrieved August 1, 2011.
  15. ^ U.S. GAO, "Debt Ceiling: Analysis of Actions During the 1995-1996 Crisis", AIMD-96-130, 1996 August 30
  16. ^ New Republic, "How Clinton Handled His Debt Ceiling Crisis Better Than Obama", Kara Brandeisky, 2 August 2011
  17. ^ Sweet 2011.
  18. ^ Bipartisan Policy Center, p. 1.
  19. ^ Levit et al. 2013, p. 1.
  20. ^ Levit et al. 2013.
  21. ^ Sahadi 2013.
  22. ^ Yglesias 2013.
  23. ^ https://fas.org/sgp/crs/misc/RL31967.pdf [bare URL PDF]
  24. ^ Detrixhe, John (September 5, 2013). "Wall Street Sees Debt-Limit Talks Past Mid-October Target". Bloomberg.
  25. ^ "NBC/WSJ poll: Shutdown debate damages GOP". NBC News. 10 October 2013.
  26. ^ Matt Egan (28 September 2021). "US government will run out of money by October 18, Treasury secretary says". CNN. Retrieved 2021-09-29.
  27. ^ Jacob Pramuk (27 September 2021). "Senate GOP blocks bill that would fund government and suspend debt limit, as time runs short to avoid shutdown and default". CNBC. Retrieved 2022-02-16.
  28. ^ Cabello, Marcos (16 December 2021). "The US debt ceiling: What it is and how Congress avoided US default in 2021". CNET. Retrieved 2023-01-22.
  29. ^ "Q&A: Everything You Should Know About the Debt Ceiling". Committee for a Responsible Federal Budget. Retrieved 2023-01-22.
  30. ^ Tankersley, Jim; Rappeport, Alan (January 19, 2023). "America Hit Its Debt Limit, Raising Economic Fears". The New York Times. Retrieved January 19, 2023.
  31. ^ "Debt Ceiling Update: What's at Stake". www.pgpf.org. Retrieved 2023-01-22.
  32. ^ Shalal, Andrea; Bose, Nandita (2 May 2023). "Biden Won't Negotiate Debt Ceiling". www.reuters.com. Retrieved 2023-05-19.
  33. ^ Witkowski, Rachel (17 May 2023). "FAQs: The U.S. Debt Ceiling, Potential Default And Government Shutdowns". www.forbes.com. Retrieved 22 May 2023.
  34. ^ "Yellen Trashes GOP Plan to Prioritize Debt Payments". Yahoo Finance. 2023-03-16. Retrieved 2023-05-24.
  35. ^ Loe, Megan (18 May 2023). "No, the U.S. has never defaulted on its debt over failure to raise the debt ceiling". www.forbes.com. Retrieved 22 May 2023.
  36. ^ "Table 7.1 – Federal Debt at the End of Year: 1940–2016". Historical Tables. Office of Management and Budget. Retrieved May 16, 2011.
  37. ^ "The-privateer.com, 1940–1960". The-privateer.com. Archived from the original on July 16, 2011. Retrieved May 18, 2011.
  38. ^ "The-privateer.com, 1961–1971". The-privateer.com. Archived from the original on July 16, 2011. Retrieved May 18, 2011.
  39. ^ "The-privateer.com, 1971–1979". The-privateer.com. Archived from the original on May 13, 2011. Retrieved May 18, 2011.
  40. ^ "The-privateer.com, 1979–1986". The-privateer.com. Archived from the original on July 16, 2011. Retrieved May 18, 2011.
  41. ^ "The-privateer.com, 1987–1997". The-privateer.com. Archived from the original on July 16, 2011. Retrieved May 18, 2011.
  42. ^ a b "The Debt Limit: History and Recent Increases" (PDF). Retrieved May 18, 2011.
  43. ^ "Republicans Raise US Debt Ceiling to $9 Trillion, Caused by Iraq War and Tax Breaks for the Rich". Usliberals.about.com. Archived from the original on 2011-08-07. Retrieved 2011-08-07.
  44. ^ "FINANCIAL AUDIT- Bureau of the Public Debt's Fiscal Years 2008 and 2007 Schedules of Federal Debt" (PDF). Archived from the original (PDF) on 2011-07-21. Retrieved 2011-08-07.
  45. ^ "Understanding the Federal Debt Limit". The Concord Coalition. Archived from the original on 2010-06-10. Retrieved 2011-08-07.
  46. ^ Krawzak, Paul M. (November 2, 2015). "Obama Signs Budget Deal and Debt Limit Suspension". Roll Call.
  47. ^ Kasperowicz, Pete (March 4, 2019). "Meet the new debt ceiling: $22.03 trillion". Washington Examiner.
  48. ^ Segers, Grace; Tillett, Emily (August 2, 2019). "Trump signs budget deal and suspends debt ceiling until 2021". CBS News.
  49. ^ Franck, Thomas (August 2, 2021). "Treasury Dept to invoke 'extraordinary measures' as Congress misses debt-ceiling deadline". NBC News.
  50. ^ Beech, Eric (October 14, 2021). "Biden signs bill raising U.S. debt limit, averting default". Reuters.
  51. ^ Cabello, Marcos (December 16, 2021). "The US debt ceiling: What it is and how Congress avoided US default in 2021".
  52. ^ Watson, Kathryn (June 2, 2023). "What's in the debt ceiling deal — and what's not".
  53. ^ Gregorian, Dareh (June 3, 2023). "Biden signs bipartisan debt ceiling bill to avert government default". NBC News. Archived from the original on June 3, 2023. Retrieved 2023-06-03.
  54. ^ Austin, D. Andrew (April 27, 2015). "The Debt Limit: History and Recent Increases". Congressional Research Service. p. 11. Retrieved July 1, 2015.
  55. ^ "Debt to the Penny (Daily History Search Application)". treasurydirect.gov.

Sources

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