US Debt Ceiling Must be Changed

1917 US Debt Ceiling Legislation

The US debt limit legislation was initially put in place in 1917, during World War I. The legislation was intended to give the US Treasury Department more flexibility in managing the country’s finances during the war.

At that time, the US government was borrowing heavily to fund the war effort, and the debt ceiling was passed to ensure that the government did not exceed its borrowing capacity. Prior to 1917, when Congress authorized individual bond issues, typically for a stated purpose, the Treasury Department could borrow money pursuant to that authorization. In 1917, the legislation authorized the Treasury Department to issue bonds to finance the war up to a certain limit.

Since then, the debt limit has been raised many times as the federal government has continued to borrow to finance various programs and initiatives. The debt limit is now one of the most contentious issues in US politics, with regular debates over whether to raise it or not.

Debt Ceiling Increases Through the Years

Depending on who is doing the research, the US has raised its debt ceiling (in some form or other) at least 90 times with 78 increases since 1960, including 18 times under Ronald Reagan, four times under Bill Clinton, and seven times under George W. Bush.

In 1979, noting the potential problems of hitting a default, Dick Gephardt 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 The rule stood until it was repealed by Congress in 1995.

Here are the number of times the debt ceiling limit was increased during each presidential administration since the 1980s^*:

• Reagan Administration (1981-1989): The debt ceiling was increased 18 times.
• George H.W. Bush Administration (1989-1993): The debt ceiling was increased 9 times.
• Clinton Administration (1993-2001): The debt ceiling was increased 4 times.
• George W. Bush Administration (2001-2009): The debt ceiling was increased 7 times.
• Obama Administration (2009-2017): The debt ceiling was increased 8 times.
• Trump Administration (2017-2021): The debt ceiling was increased 2 times and suspended 2 times.

* It’s important to note that these numbers represent the number of times the debt ceiling was raised and not necessarily the number of individual bills passed. In some cases, multiple debt ceiling increases were included in a single bill. Additionally, there were instances where temporary suspensions of the debt ceiling were enacted, which allowed the Treasury Department to borrow without specifying a specific dollar limit. – ChatGPT from OpenAI

Increases of the US Debt Ceiling Under Donald Trump

The debt ceiling increased two times under President Donald Trump, but the Trump administration also tinkered with the budget and the debt ceiling in other ways throughout its four years. When Trump was sworn into office in January 2017, the national debt stood at $19.9 trillion. By November 2020, the debt had increased to over $27 trillion.

Under Trump, the debt ceiling increased to $22 Trillion, while the debt increased to $27 Trillion:

• by $1.7 trillion to $19.8 trillion (de facto) in March 2017
• by $2.2 trillion to $22 trillion in March 2019
• debt ceiling suspended from August 2019 to July 31, 2021

There were two bills passed which suspended the debt ceiling during the Trump administration. The second bill suspended the debt ceiling in August 2019, through July 2021. At the time of the 2020 election, the national debt stood at over $27 trillion, the fastest rate of increase of the national debt of any modern president.

Here are the key provisions of each bill:

Bipartisan Budget Act of 2018 (passed in February 2018):

The bill suspended the debt limit until March 1, 2019, providing additional borrowing authority for the Treasury Department. It set spending levels for fiscal years 2018 and 2019, increasing both defense and non-defense discretionary spending.

The bill also included provisions related to disaster relief funding for areas affected by hurricanes and wildfires, as well as funding for community health centers. Additionally, it made some changes to Medicare and other healthcare programs, such as extending funding for the Children’s Health Insurance Program (CHIP).

Bipartisan Budget Act of 2019 (passed in August 2019):

The bill suspended the debt limit until July 31, 2021, allowing the Treasury Department to borrow necessary funds to meet federal obligations. It also established overall spending levels for fiscal years 2020 and 2021, raising the budget caps and authorizing increased discretionary spending. The bill included a mix of spending increases for both defense and non-defense programs, addressing priorities such as defense funding, healthcare, education, and disaster relief.

It did not include any significant policy changes or reforms beyond the budget and spending provisions. It’s important to note that while these debt ceiling increase bills included provisions on budget and spending matters, they did not involve major policy changes or reforms beyond those related to budget caps, discretionary spending levels, and specific funding allocations.

Is the US Debt Ceiling Legislation Constitutional

Some Constitutional legal scholars and saying the 14^th Amendment to the Constitution of the United States of America requires the US Government to pay its debts even if they must exceed the threshold set by the Debt Ceiling to do so. Section 4 of the 14th Amendment reads, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

The National Association of Government Employees on behalf of about 75,000 federal employees recently filed suit in Boston’s Federal District Court against Treasury Secretary Janet Yellen and President Biden. They are seeking a declaration that the debt ceiling is unconstitutional and unenforceable, and an injunction against enforcing it. They claim the President and the Treasury Secretary have suggested they might treat the ceiling as requiring them to defer paying some of our debts once the limit has been reached, and that in turn threatens the employees with losing their jobs.

Laurence H. Tribe, the Carl M. Loeb University Professor of Constitutional Law emeritus at Harvard Law School, argues the 14th Amendment requires Biden to pay all authorized debts, an obligation that supersedes any debt limit statute. He goes on to suggest if the US Treasury exceeds the borrowing limit set by the Debt Ceiling it would be i) difficult to find an injured challenger with standing and ii) if a valid challenger could be found, they would struggle with posing an effective request to the court.

Asked if Congress could argue that by ignoring the debt ceiling President Biden is violating the Constitution’s delegation of spending to the Legislature, Tribe began by stating he didn’t think the Senate would join the House in filing a suite and the US Legislature would need to act together to bring such a suite.

If the US Legislature were to bring a suit the issue would likely need to be that President Biden is letting the Treasury Department borrow money Congress hasn’t authorized it to borrow under the power that Article I, Section 8, Clause 2 gives Congress to “borrow Money on the credit of the United States.” Such a suit would put any court in a terrible bind because it would have to choose among options none of which would leave all the laws of the U.S. intact.

Either the laws creating duties to individuals and corporations to whom the U.S. has a debt would be abrogated, in violation of the 14th Amendment, or the law capping what Treasury can borrow would be abrogated, in violation of that one law. A presidential choice to abrogate that one law instead of all the others — and the Constitution to boot — would be hard for any court to overturn.

Laurence H. Tribe

My take

The debt ceiling, in its current form, is used by both political parties to create anxiety in the financial markets to gain leverage in taxing and spending discussions. The impact these artificial crises have on mortgage rates, cost to service the US debt, and financial markets greatly exceed any benefit the debt ceiling has on controlling spending. The original purpose of the debt ceiling – to allow the US Treasury flexibility in borrowing money to make payments to those owed by the US – can be better served by tieing debt to spending legislation.

The debt ceiling is often explained as being similar to the limit on a credit card. If this was the case, it might help curb the legislature’s appetite to cut taxes and increase spending. Unfortunately, this is a false analogy. The limit on a credit card prevents you from buying things that cause you to go above your credit card limit. The legislative action that is rightly compared to a credit card purchase is the budget and other spending or tax cut legislation. That is when the US Government’s money is obligated to a creditor.

The debt ceiling is better compared to the time when the credit card payment is due. The obligation already exists. The goods and services have already been received. The US is obligated to pay the salaries of our military and other government employees, along with other accounts payable and debt.

Can Congress change the debt ceiling so that it acts like the spending limit on a credit card? The “Gephardt Rule” is the best example we have for tying increases in spending with increases in the nation’s capacity to borrow to pay for the spending. Tax cuts would need to be treated similarly if this change is going to address the majority of cases for debt limit increases. This won’t solve every situation which may cause the US to need to borrow more money. The cost to service the debt changes with interest rates, entitlements change with population, and other obligations will increase from time to time. But it will tie debt discussions with the debate on spending and tax-cutting where it should be front and center and not swept under the rug until the next debt ceiling limit can be used by one party to threaten to throw the world’s financial markets into chaos so they gain a few more 24-hour news channel sound bites and perhaps get a tax cut made permanent, spending increases, or force SNAP recipients to file a few more forms showing they went to some job interviews.

The US Congress should pass legislation that requires the debt ceiling to be raised when spending bills or tax cuts are passed. This is when and where the debate on reducing the US debt is best resolved. It also would force Congress to articulate the impact spending and tax-cutting legislation will have on the US Debt.

Sources

Wikipedia contributors, “History of the United States debt ceiling,” Wikipedia, The Free Encyclopedia, https://en.wikipedia.org/w/index.php?title=History_of_the_United_States_debt_ceiling&oldid=1155058426 (accessed May 16, 2023).

Tom Murse (December 16, 2020 ), “6 Modern U.S. Presidents Who Raised the Debt Ceiling”, ThoughtCo., https://www.thoughtco.com/presidents-who-raised-the-debt-ceiling-3321770   (accessed May 16, 2023).

Christina Pazzanese (May 15, 2023), “How 14th Amendment can help Biden avoid default”, The Harvard Gazette, https://news.harvard.edu/gazette/story/2023/05/laurence-tribe-explains-how-14th-amendment-can-help-biden-avoid-default/ (accessed May 16, 2023).

This piece was written with the help of OpenAI’s ChatGPT. A series of requests were submitted to ChatGPT and then compiled and edited to create this post.