Since the U.S. Constitution took effect on March 4, 1789, the United States government has carried an amount of debt to pay for the services that it provides to its countrymen and -women. The Revolutionary War and the Articles of Confederation provided for the majority of the original debt, reported on January 1, 1791, at $75,463,476.52.
Through the years, the debt level has fluctuated, reaching a low of $33,733.05 in 1835. For the majority of the time, though, it has steadily increased, with every presidential administration since Herbert Hoover leaving office with a debt higher than when it entered.
Prior to 1917, the debt level was maintained through parliamentary procedures that limited the amount of spending authorized. As these procedures were not actual law, Congress passed the Second Liberty Bond Act in 1917 which set the first debt ceiling. The debt at the time had been reported to be just under $5.72 billion, over twice what it had been just five years prior. Since then, the national debt of the United States has risen to its current level of just over $28.43 trillion, according to some reports; the U.S. Debt Clock puts this figure over $28.8 trillion.
Since the enactment of the Second Liberty Bond Act, the debt ceiling has been raised or suspended a total of 112 times. With current legislation, Congress is attempting to add a 113th incident of this to the record.
As of the writing of this article, the current U.S. Debt Ceiling is set at $28.5 trillion, enacted through de facto means on July 31, 2021. With the fiscal year having started on October 1, Congress pulled out a last-minute deal on September 30, 2021, to enable continued spending through December 31, 2021.
The U.S. National Debt grows at a rate of $45.486 per second, or $3.9 million per day. That equates to over $1.4 billion per year.
The debt ceiling was implemented to rein in spending by Congress through law instead of through procedural means. Expanded over once per year on average since 1917, the debt ceiling is equivalent to a spending limit on a credit card. It allows Congress to borrow money through bonds and other securities that the U.S. Treasury issues – Savings Bonds and the like – to fund budget allocations to which it is already committed.
To simplify the process, Congress develops a budget that lays out spending to which it is committed, similar to a household’s budget of spending for rent/mortgage, utilities, groceries, entertainment, and other purposes. The budget is required by Law to be set for the fiscal year of October 1 to September 30 of the next year.
Providing for this spending are taxes, fees, and fines collected by the government. When the revenue from these sources does not meet the spending that has been budgeted, Congress develops a deficit, which is separate from but does contribute to the debt.
In order to cover this deficit, Congress orders the U.S. Treasury to issue securities such as Savings Bonds and the like to use to borrow money. These securities are considered collateral for the loan, with most of these securities offering interest to be paid in addition to the loan amount. So, when a person purchases a Savings Bond, that person is loaning the United States the amount of money that the Bond costs. When the Bond is redeemed, the person redeeming the Bond is collecting on the loan that was previously made. Savings Bonds and other securities have maturity dates, at which point the security begins earning interest. If a security is redeemed prior to its maturity date, then the redeemer is paid up to the face value, or the original “purchase price,” of the security; the amount paid can be less than the face value as, when the security is purchased, it is considered a loan to be paid after a specific time period. Redeeming a security prior to the maturity date is akin to the debtor paying off a loan early in that no “unearned interest” is paid.
The debt created by the issuance of these securities is equivalent to Congress borrowing money by using a credit card. The collective balances on these securities total the U.S. National Debt.
As with personal credit cards that are used by households to cover expenses that go beyond their income, there is a limit to the amount of money that can be borrowed, or charged on the “cards.” Once the limit is reached, then any bills left outstanding at that point cannot be paid until the credit limit is increased or the account is paid down to the point that there is credit available.
Since Congress has, despite the spirit of the Debt Ceiling, continued to spend at deficit levels, the only option available is to have the credit limit increased if spending levels are to be met. In this millennium, only 2000 and 2001 had budget surpluses; every other year has seen Congress spend at deficit levels, adding more to the Debt.
Congress, though, has the ability through legislation to increase the Debt Ceiling, or credit limit, at their whim. This allows them to budget for spending at their desired levels, regardless of the impact to the Nation Debit, knowing that they can simply increase the Ceiling and increase their borrowing power as needed, regardless of revenue levels, and in contrast to what is able to be done with personal credit.
Seemingly each year, though, and some years multiple times in that year, Congress is met with the fact that spending is occurring and the deficit is increasing at such a rate that the National Debt will soon meet the previously-set limit. In those instances, as is presently occurring, a debate occurs as to whether or not the Ceiling should be raised.
Even without such a raise in the Ceiling, the debt continues to accumulate. Added to the deficit spending is interest to be paid on securities already issued and borrowing that has already occurred.
When the ceiling is not raised, though, borrowing must stop. As mentioned earlier, bills that have not yet been paid are unable to be paid, and the work associated with those bills stops. Just as if a budget or temporary spending bill has not been passed and enacted, the government essentially shuts down due to not having the money allocated or available to continue operations.
For most, such a shutdown has little effect in the short term. Anecdotal situations, such as those receiving government “assistance” such as S.N.A.P. (Food Stamps), Social Security, and other benefits, are used by politicians to push individual needs over that of the country and to drive demand for an increase to the Ceiling.
As human nature is to “look out for Number One,” people are moved by the anecdotes provided and think of themselves in the same situation. Pressure is then applied on politicians to increase the Ceiling each year and, when the next budgetary debates are held months later, the fact that the Ceiling has been raised is forgotten. Instead of clamoring for more-responsible spending by Congress of the public dollars, the process repeats itself when the spending forces the debt to the new ceiling and a new shut down is on the horizon.
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