The “how” and “why” of the debt ceiling

02-16-2014 • Free Press Publications

Over the past several years, it has become a something of a tradition for the Congress and President to claim that the federal government will not be able to pay its bills unless the debt ceiling is raised. In fact, the debt ceiling has been increased, or suspended, a total of seventy-nine times since 1940. However, the United States government, which has had a national debt since it was created (with the exception of 1835) did not always have a debt ceiling, which should actually be called a money pit. Prior to 1917, any debt accrued by the federal government would need to be specifically approved by the Congress. The initial debt ceiling, passed in the Second Liberty Bond Act, was set at $9.5 billion in Treasury bonds and $4 billion in one-year certificates. This removed some of the Congressional oversight from the Secretary of the Treasury. Until 1939, when Congress created an overall aggregate limit on the national debt, increases in the national debt were simply amendments to the