Although the United States has had a legal federal debt ceiling on the books since 1917, it has not really been an issue until the massive government borrowings needed to finance World War II. And even then, the President and Congress had no compunctions about raising the debt ceiling during a military challenge that posed an existential threat to our nation.
Raising The Federal Debt Ceiling
During the decades since then, as our national debt approached its legal ceiling --often with the president’s urging -- Congress would obediently raise the legal debt ceiling. Clearly, this political two-step was just a charade carried out for everyone involved to cover their political asses.
But in recent decades, Congress has been less obliging in raising the ceiling, especially if both Houses were not controlled by the President’s political party. As the debt approached the ceiling, the U.S. government had increasing difficulty paying its bills.
The Secretary of the Treasury and other Administration officials resorted to such drastic measures as delaying the sending out of tax refunds, furloughing “nonessential” government workers, or asking government employees to continue working while temporarily going without being paid. We’ve even had a few partial federal government shutdowns while interest rates paid by the U.S. Treasury have risen and our government’s credit rating has fallen.
Has the debt ceiling been at all effective in holding down the debt? Well, you know the answer to that one! In 1960 the national debt was $286 billion. It now stands at over $28.5 trillion, It’s nearly 100 times as high as it was 60 years ago. Even after allowing for inflation, the debt is more than ten times as high as it was in 1960.
Every few years Congress raises the national debt limit, thereby kicking the can further down the road. That’s about as effective as the governors of the states bordering the Mississippi River urging their legislatures to set legal water level ceilings high enough to prevent the river from overflowing its banks and flooding hundreds of miles of riverbank homes and businesses.
Setting National Debt Ceilings Is Counterproductive
You would think that after going through this charade for more than sixty years, a majority of members of Congress would figure out that setting national debt ceilings is not just futile, but actually counterproductive.
Why then does Congress insist upon going through this charade every few years? There’s actually a very simple answer: Its members want to appear to be making a great effort to keep the national debt from continuing to rise.
That might make sense, except for one inconvenient fact: These same guys have long been voting for massive government spending increases, often supplementing them with massive tax cuts. These two activities are causing our skyrocketing national debt. So, it’s the height of hypocrisy to oppose raising the debt ceiling right after they’ve voted for higher spending and lower taxes. Indeed, why have a debt ceiling at all if we just keep raising it?
Within another month or two, President Joe Biden and Congressional Republicans will dance their way through this debt ceiling ritual once again. But virtually none of these members Congress will have the guts to abolish the debt ceiling once and for all. That would require real political courage – a commodity which is in exceedingly short supply in Washington these days.
In sum, the only benefit derived from the imposition of a national debt ceiling is the political cover it provides members of Congress for massive spending increases and huge tax cuts – both of which substantially raise the national debt. The debt ceiling not only creates periodical fiscal crises, but it causes disruptions in government services, imposes hardship on government employees, and jeopardizes our government’s credit standing. Is that a price worth paying just to provide political cover to the members of Congress who caused these crises in the first place?