Five Facts on the Debt Ceiling Debacle
Since 1917, when the debt ceiling was first implemented as part of the Second Liberty Bond Act, Congress has voted to raise the debt limit more than 100 times, ensuring that the government can continue to spend money and pay its debts. But the U.S. is now less than a month away from breaching the debt ceiling unless the White House and congressional leaders can forge a deal. Here are Five Facts on how once-sedate debt ceiling votes have become so high-stakes and controversial.
1. In 1984, then-Sen. Joe Biden supported an amendment that would have linked future debt ceiling increases to a federal spending freeze.
Senator Biden explained his stance by saying,“I cannot agree to vote for a full increase in the debt without any assurance that steps will be taken early next year to reduce the alarming increase in the deficits and the debt.” The freeze Sen. Biden supported would have applied to all federal spending, including mandatory spending like Social Security and Medicare.
2. 2011 marked the first time when political debate over the debt ceiling hurt the credibility of the U.S. dollar.
In 2011, the Republican controlled House of Representatives tried to use the debt ceiling vote to force President Obama to accept significant spending cuts. This crisis, which brought the U.S. to the brink of default, resulted in the first-ever downgrade of the nation's credit rating – Standard & Poor’s dropped the U.S. from an “AAA” rating to “AA+” – and set the precedent for using the debt ceiling as a political bargaining chip in future spats.
3. The United States is one of only twodeveloped countries that has a debt ceiling with a specific number beyond which the government can’t issue debt.
Denmark is the only other country that sets a firm limit on the amount of debt it can accumulate. Kenya, which previously used the system, is in the process of joining the European Union, as well as Poland, Malaysia, and a few other countries in tying its debt limit to a set percentage of its gross domestic product – the overall size of its economy. Almost every other country has no mechanism for imposing a debt limit.
4. When the debt ceiling was created in 1917, the total U.S. debt was $5.7 billion. Today, it is $31.7 trillion.
In recent years, both parties have played a role in the exponential increase in the U.S. national debt. Tax cuts and spending increases signed into law by President Trump grew the debt $6.7 trillion, from $20.2 trillion to $27.8 trillion, and President Biden’s spending bills have grown it an additional $3.9 trillion to $31.7 trillion.
5. In recent years, Congress has become more likely to suspend rather than increase the debt ceiling.
In recent years, Congress has attempted to sidestep the partisan battles by suspending the debt ceiling for a fixed period, allowing the Treasury to borrow as needed during that time. In effect, this raises the debt ceiling by an unknown dollar amount, because it can be difficult to accurately predict how much more debt the U.S. will accumulate within a certain time frame. While this approach has temporarily alleviated the political pressure to lift the debt ceiling, it ends up usually just setting up another partisan battle down the road.