The History of the Debt Ceiling, Explained

The measure was first implemented not to keep debt down but to more easily increase it.

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House Speaker Kevin McCarthy at the Capitol Building April 17, 2023, in Washington, DC. (Photo by Anna Moneymaker/Getty Images)

There is perhaps no stranger American political tradition than the recurrent debt ceiling crisis, wherein Congress puts the country on the brink of financial disaster in the name of fiscal responsibility. As House Speaker Kevin McCarthy plans to introduce a bill to raise the debt ceiling and cut federal spending—setting up a potential showdown with President Biden—a look at the debt ceiling’s history can help us understand how we got here. 

What is the debt ceiling? 

Almost every year, the government spends more money than it collects in taxes. To make up the difference, the Treasury borrows money, which adds to the government’s debt. The debt ceiling is a congressionally imposed dollar limit on that debt. 

If the goal of the debt ceiling is to keep the country’s debt down, it has not been remarkably effective. Congress first imposed a debt limit of $13.5 billion in 1917. Since then, U.S. government debt, adjusted for inflation, has grown more than a hundredfold. The debt ceiling’s apparent ineffectiveness helps explain why no other major country, with the not-so-notable exception of Denmark (their debt ceiling is a mere legal formality), has adopted the measure. 

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  1. Mrobertchase1

    What I most like about this article and TD's "explainers" generally, is the low-key approach. No need to demonize Gephardt or Gingrich. Just give us the facts.

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    Rajeev

    99% of the time when you compare a government action with a personal or small business action the analogy is ridiculous. For example, regular families can’t print money so saying that people can’t spend more than they earn doesn’t apply to governments.

    But in the case of the debt ceiling, the analogy is spot on. Running up credit card debts and then deciding whether to pay past debts is ludicrous.

    They should force all budget cuts during the budgeting procedure or continuing resolutions. The Republicans did a great disservice when they started this nonsense in 2011. Unlike the other kabuki theater involving government shutdowns this one can significantly hurt the US economy just by having the standoff.

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    Ben Connelly

    “ Congress first imposed a debt limit of $13.5 billion in 1917.”

    We should have kept it there… just kidding.

    “ while others posited that failing to pay the nation’s debts would be no worse than furloughing some workers, closing down a few parks, or “not [cutting] the grass on the Mall.””

    My vote would be to get rid of the post office.

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  4. F d'Anconia

    Just raise it to $100,000,000,000,000, that should keep the current congress from having to go through this exercise for the rest of their lifetime (or maybe not...)

    Pitiful what has happened to this great country (we get the government we elect)

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  5. Bobby D

    This is an entirely manufactured controversy . There is today a bipartisan coalition in the House that would pass legislation to increase the debt ceiling. The problem comes from the so-called Hastert Rule, which requires that the majority party’s caucus have at least 218 votes for the legislation.

    The Hastert Rule made some sense in a day and age when the Speaker had authority to keep people in line and on script. It reflected a deference to a minority who took immense risk to dissent. In that sense, there was mutuality. People got in line most of the time because they knew that the Speaker would have their back on a few issues where they dissented. That situation exists no longer. Today dissenting involves zero risk, and is often the path to rewards. So, there’s no reason why the Speaker should have anyone’s back. If the Clown Caucus won’t stay in line, just put the legislation up for a vote and let them get steamrolled. Otherwise, you’re giving 7% of the Congress unchecked veto power over every piece of legislation.

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      PaulH

      I don't think the Hastert Rule is actually the problem. The Hastert Rule requires that a majority of the party support a proposal in order for it to be brought to the floor. If McCarthy wanted to advance a clean increase in the debt ceiling he could do so -- assuming that at least half of the GOP caucus would support him. The Democrats would go along with that approach so the bill would pass the House. However, doing so would end his speakership as he would lose support of the Clown Caucus (and probably others).

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      1. Bobby D

        I’m fine with the rule if it’s implemented in that way. In recent years, we’ve seen legislation held up because it lacks 218 votes from the GOP caucus. So, a number of concessions are made to buy off the Clown Caucus, who will turn around and hold the whole caucus hostage again when the next important vote comes up.

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          PaulH

          Well, you still need a majority. And if the Democrats won't provide any support for a matter than it just takes a few Republican defectors to take an issue -- that has nothing to do with the Hastert Rule. With respect to the debt ceiling, McCarthy would get plenty of Dem support for a clean raise of the ceiling.

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  6. Kittyecws

    This article is interesting but I expected to see some mention of the consequences of not raising the debt ceiling.

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  7. Rossknode

    How large our debt has gotten to is ridiculous and we need to make the difficult decisions about reducing entitlement payouts. But this fight has nothing to do with that. That Republicans happily spent and spent and spent but now don't want to pay their bills. That's dishonest. And who actually trusts that the Republicans can pay down this debt over the next 10-15 years? They have zero credibility. They spend, and sometimes even worse than the Democrats they demonize.

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    Aylene Wright

    So basically we are all doomed.

    Really thinking I should take another break soon, as "we are all doomed" really does seem like a TD editorial motto these days.

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      Cthocas

      I much prefer Commentary's motto of "Crushing morosity."

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  9. Owenoofta

    One person’s ceiling is another person’s floor - but we all live under the same roof…

    I’m not sure what this has to do with our debt ceiling problem, but it might ?

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