Federal Government's Debt Ceiling Dates to 1917

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The debt ceiling is the legal limit on how much money the U.S. Government can borrow to pay its bills. The Government needs this limit because it is usually in the position of needing to spend more money than it takes in. If no new revenues, from taxes or from borrowing, are available, then the Treasury Department cannot pay for a great many things, including these:

  • Social Security benefits
  • Medicare benefits
  • veterans' benefits
  • federal employees' salaries and benefits
  • unemployment benefits
  • student loan payments
  • military salaries and retirement benefits.

A 1917 law established the debt ceiling, to give the country more flexibility in approving new spending during World War I. Before that time, Congress had to approve all federal borrowing. The Second Liberty Bond Act of 1917 allowed the government to borrow money as long as it didn't exceed a certain total dollar amount. In 1917, that amount was $15 billion.

Two more Public Debt Acts, in 1939 and 1941, increased the debt ceiling and created the capacity for Congress to increase it further each year, while also allowing the Treasury Department more flexibility in how to allocate revenues created by new borrowing. A 1974 law, the Congressional Budget and Impoundment Control Act, stipulated that any debate over raising the debt ceiling should be separate from the passage of the annual federal budget. The intent of this law was to encourage further debate on the debt limit.

Congress has voted to increase the debt ceiling nearly 100 times since it was established, with the majority of those increases coming since 1962. The debt ceiling has progressed rapidly from less than $1 trillion in the 1980s to $6 trillion just a decade later and to more than $16 trillion in 2012.

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