This is not a new story. The Republican Party has been using the debt limit as a partisan stick since 2009. When a Republican president is in power, he happily relies on bipartisan support from Congress to secure the full confidence and credit of the United States government . When a Democrat occupies the White House, he militarizes the debt ceiling and refuses to participate in its adjustment. It’s a shameless partisan story – but now it’s a familiar story.
However, there is another dimension of the debate that goes unnoticed. The idea of ââa “limit” or a “ceiling” on public debt sounds as a significant constraint on borrowing, the sort of thing the Constitution requires to control a fleeing White House. In reality, it is a 20th century innovation, originally intended to give more, not less, authority to the president. A measure born out of the need during WWI and WWII to give the Wilson and Roosevelt administrations greater leeway in funding government operations has turned into a partisan noose.
Understanding the origins of the debt limit highlights just how radical its current militarization really is.
The US government has always borrowed money to finance its operations. The total amount of unpaid debt hovered below $ 100 million in the years before 1860, but reached over $ 2.7 billion during the Civil War. By the end of the 19th century, it stood at around $ 2 billion, a figure that remained more or less stable until World War I, when military mobilization required a wave of borrowing, pushing up the national debt to $ 27 billion.
Less important than how a lot the government had to mechanism by which he raised debts. Before World War I, Congress authorized specific debt issues. During the Civil War, the legislature passed several bills authorizing the Treasury Department to sell bonds with specific maturities and coupons. One popular issue was the 5 and 20 Bonds, which paid 6% annual interest on a 20-year maturity date, with an option for the government to buy back face value after five years. Hundreds of thousands of Northerners bought the government newspaper in a display of patriotic fervor. Generally speaking, the new borrowing authorizations were earmarked for specific purposes – for example, the Panama Canal bonds, which could only be used to finance the construction of the historic trade passage between the Atlantic and Pacific Oceans. .
Until World War I, the Treasury Department had little leeway to roll over or consolidate existing issues, design the terms of new debt offerings, or transfer funds from one committed flow to another. Congress has largely dictated the terms; the main role of the Treasury Department was to market and administer public debt instruments. This disparate system worked quite well when government borrowing remained at modest levels, but during World War I the sharp increase in borrowing and spending made the old system impractical. The Wilson administration needed flexibility to raise and commit funds for war production. In response to this reality, Congress for the first time set overall levels of debt financing and gave the Treasury Department more freedom to move money where it was needed. This was the origin of what we know today as the debt ceiling, although specific issues – for example, Liberty Loans – still retained their own statutory limits.
From 1941, the system evolved further, when Congress passed the first in a series of public debt laws that both (repeatedly) raised the overall debt ceiling and consolidated all authorizations. loan under the Treasury Department. In the future, different departments and agencies borrowed what they needed from the Treasury, which in turn issued, managed and marketed the debt within legal limits. This is indeed the way things work today.
During the Debate in the House On the Public Debt Act of 1941, Representative Robert Doughton of North Carolina, Democratic chairman of the Ways and Means Committee and director of the bill, stressed that the purpose of the measure was to “provide funds to cover the credits, authorizations and commitments made by Congress âto finance the government’s war effort. âThe bill neither affects nor authorizes the spending of funds. Its sole purpose is to enable the Treasury, under the restrictions and limits set by the bill, to obtain the funds necessary to finance the program that Congress has authorized or will authorize by new legislation.
This was the crux of the argument. Even in 1941, Republican deficit hawks opposed consolidating and raising the debt ceiling as an exercise (in Doughton’s words) of “disturbing and unnecessary extravagance.” In response, Doughton accused his Republican critics of engaging in “political partisanship” and reminded the House that “it would be very inconsistent, indeed, for Congress to authorize credits and not provide the Treasury with the funds. necessary to cover these authorizations and credits. “In fact, ‘the gentlemen of the minority voted for these credits as well.’
The question was not whether Congress should insist that “savings” be taken from other areas of federal spending as the nation rallied for war. Doughton asserted that “Members of Congress on both sides of the aisle are of the same opinion and agreement” on this point. The question was whether Congress would allow the Treasury Department to pay for this Congress had already appropriated, and what authority he would give the ministry in managing the nation’s debt.
The specifics of how the debt ceiling works have evolved since World War II. In response to feuds with the Nixon administration, in 1974 Congress passed the Congressional Budget and Imoundment Control Act, which removed the debt limit debate from the annual budget process – apparently to give lawmakers greater freedom. consider or reject more loans without feeling pressured to vote. the budgetary framework of a whole year. But overall, the system has remained consistent for over 80 years. Its raison d’Ãªtre too.
As was the case in 1941, today Congress has full authority to reduce federal borrowing. All he has to do is spend less or tax more. As Doughton pointed out eight decades ago, the time to do this is during the budget and appropriation process, not after money was allocated and spent during the debt limitation process.
Fast forward to 2021. After adding $ 7.8 trillion to public debt in just four years, between 2017 and 2021, Republicans have rediscovered their commitment to fiscal probity. Speaking on behalf of his party, Minority Leader Mitch McConnell has made it clear that GOP senators will not provide a single vote to raise the debt ceiling, even if the government risks defaulting as early as October. – and even if the very need for an adjustment due to the spending and tax cuts that McConnell’s party approved between 2017 and 2021.
It doesn’t matter to McConnell that his caucus allowed Donald Trump to increase the deficit as a percentage more than all the other presidents except George W. Bush and Abraham Lincoln. His calculations are deeply cynical.
But the political theater currently unfolding on Capitol Hill highlights a fundamental truth: the eternal debate over whether Congress should pay for what Congress has already spent has become a political masquerade – entirely divorced from it. original intention of the debt ceiling. Designed to help presidents meet the demands of national emergencies and to ensure the government can pay the bills that Congress has already accumulated, the debt ceiling has become a blunt instrument in the hands of a radical and destructive minority.
As they address the looming emergency, Democrats could consider the possibility that the debt limit no longer meets the purpose for which it was designed. Maybe it’s time to get rid of it.