September 27, 2013

Chart of the Week: The bipartisan federal debt limit

budget-ceiling

With the Republican-controlled House, the Democratic-run Senate and President Obama headed for a showdown — yes, another one — over raising the federal debt ceiling, it’s perhaps helpful to remember that the statutory limit on government debt has been a bipartisan headache for decades.

Since 1980, according to this interactive graphic from The Washington Post, the debt limit has been increased 42 times, under both Republican and Democratic presidents and every possible configuration of partisan control in Congress. The limit now stands at $16.699 trillion, up from $1.39 trillion three decades ago; Treasury Secretary Jacob Lew has said the government will hit that limit by Oct. 17.

For nearly 130 years the U.S. got along without an overall limit on government debt; instead, Congress authorized specific debt issuances for particular purposes, such as building the Panama Canal (1902). One such law, the Second Liberty Bond Act of 1917, originally authorized borrowing to cover the expenses of fighting World War I, but by 1939 it had evolved into a $45 billion aggregate limit on virtually all federal debt. That law, as amended, became the basis for the current statutory limit. (The Congressional Research Service has prepared a very helpful primer on how the debt limit works and its history.)

Raising the debt ceiling has long been treated as a distasteful chore, the Capitol Hill equivalent of cleaning the gutters. For many years the bills were drafted as temporary increases to a relatively small amount of “permanent” borrowing authority, which led to repeated crises in the 1970s when the “temporary” authorizations expired. As often as not, the debt-limit bills lacked official sponsors, no one apparently wanting to take even nominal responsibility for raising the ceiling.

But the debt-limit disputes, like budget matters generally, have grown more rancorous and sharply partisan over the past few decades, and their solutions have become more and more convoluted. The standoff in the summer of 2011, for instance, was resolved by Congress allowing President Obama to raise the debt limit on his own authority in three stages, the last two subject to congressional vetoes. In February of this year, Congress voted to suspend the debt limit entirely for three and a half months, then retroactively raise it to cover whatever borrowing took place over that span. That’s the $16.699 trillion limit in place today.

Category: Chart of the Week

Topics: Government Spending and the Deficit

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

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3 Comments

  1. Jason2 months ago

    Is the lack of jobs due to the America’s Trade deficit? Or could it be due to one of America’s other deficits? These other deficits include Federal Budget Deficit, The Savings Deficit, The Trade Deficit, and The Leadership Deficit. (Concordcoalition.org/americasfourdeficits). The Federal Budget Deficit is where the government is spending more on public goods and services than it collects in tax revenues. The Saving Deficit is when a household’s spending is above the household’s income. The Trade Deficit is because America is buying more services from other countries then it produces and sells to other countries. The Leadership Deficit is when the politicians publically encourage tax cuts. They do this in order to improve their chances to win election but in all reality American still have to pay the same amount, if not more, in the end. With every “free” thing given out or everything that is stolen we go farther in debt. We have to pay for each and everything we get, whether it’s through interest, out of our pocket, or through taxes. With every foreign piece of equipment we buy from another country we take away another possible job that could’ve been here in America. But on that same page we are supplying all the other countries with plenty to work on, and live off of. Their families have good income; their families don’t watch the debt clock numbers roll up higher and higher. While in America we watch the debt clock go up dollars a second, thousands a day, millions and billions a year. Did you know the moment we become taxpayers we already owe 50,000 dollars on average. That is if you split up all of the debt evenly among the tax payers. But if there is a lack of jobs and you’re stuck out on the street, without a job, how will you ever pay that off? In America you don’t if you don’t have a job you live off welfare, and the people who are taxpayers for every food stamp and the free meals given out to the ones who can’t afford it. All of these deficits interrelate to each other.

    But the controversy here is which one of these deficits are most keeping jobs from America? The main controversy on this subject is between The Federal Budget Deficit and the Trade Deficit. The Federal Budget deficit is what the politicians have been preaching about for as long as I can remember. They say we need to cut back on what America is spending on itself. A few examples of this are road maintenance, building management, and education. We spend billions of dollars just to keep America up in “looking good”. And look at the state of some of the cities in America you can’t walk three steps on the sidewalk without stepping on gum. In 2013 the federal government spent 3.5 trillion dollars on keeping America happy. In 2014 they are projected to spend 3.8 trillion dollars. And in 2015 they are projected to spend 3.9 trillion dollars. At this rate by the time I’m 27 they will be spending 4.9 trillion dollars. (usgovernmentspending.org). and what is it all for? Supposedly they are spending it on making our lives easier. Because when I turn eighteen it’s going to be easy for myself and the rest of my generation to find a job with our economy. Right? Because life gets real easy when you barely have enough money to feed your family, Right? But the way to fix this according to our government is give to the local businesses so they can expand, and that will give us the jobs that we need in America. That is our government’s plan to bring us out of debt.

    Yet they say they want to expand in jobs in America, but they are still buying more from other countries then from America but again there is a reason for everything. This reason is something called North America Free Trade Agreement. The easiest way to explain this agreement is, imagine that Congress did the following to one state; they changed the minimum wage to $3 dollars an hour, exempt that state from child labor laws, expanded the work week, reduced health and work place safety laws, banned unions, and reduced protection for the environment. And on top of this, this state would still have free duty access, to all of the other 49 states. So it would be extremely cheap to produce in that country, and would be able to sell directly to all of the other states with no additional cost. But the difference with NAFTA is Mexico and Canada would be this special state, they have these lower wages and less strict health laws and they can sell to America for no extra cost. So why would you start your big business here in America when you can move just across the border and produce your goods for literally a fraction of the cost? Just to go a little deeper into NAFTA, in 1993 before we signed NAFTA we had a slight trade surplus with Canada and Mexico. But as of 2007 the combined deficit of both Canada and Mexico was $190 Billion dollars. And this was over the course of 14 years. At that same rate at the end of 2014 we would owe them combined $380 billion dollars.

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  2. Nathan Becker7 months ago

    Debt Ceiling is a relic from the gold-standard era. The nation and the entire world went off the gold-standard on August 15 1971 and yet we continue to operate as if our monetarily sovereign nation is somehow constrained on how it creates it’s money. Our dollar is a simple public monopoly that our government can create at will. Yes there are implications on how much it creates at different points in time. Today with this high unemployment and low inflation, there is no reason why the nation cannot create enough money to boost economic activity to create spending and hence new jobs.

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    1. Jason7 months ago

      True, but printing money is only a temporary fix. Very quickly inflation catches up to the amount printed and the dollar is worth less. Look at common essentials, food, clothing, shelter. Look the stock market and corporations, gas and oil. All have gone up in the last few years. The more money put on the market the more things eventually cost. So in a sense it does absolutely nothing but make it the same or worse. The economic projections go up but the little guy will always be the little guy.

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