We can all thank President Richard Nixon for current debates over the national budget and the debt ceiling. In 1973, the debt ceiling was $465 billion, and debt was set to hit that level in the summer. In order to prevent the government from reaching its debt ceiling, Nixon took it upon himself to “impound” $3.4 billion in Congressionally appropriated funds. During that exertion of his executive power in a situation that should have been left to the legislative branch, he paved the way for the Congressional Budget and Impoundment Control Act of 1974, which established the Congressional budget process we have today and created the Congressional Budget Office in order to limit the president’s power in the future.
Of course, the history of the debt ceiling dates back much further, to 1917 and the beginning of U.S. involvement in World War I, when Congress passed the Second Liberty Bond Act in order to raise funds to pay for the war. Since the act implemented the debt ceiling into law, it has been increased 77 times, surprisingly common considering the heated debate in Congress and their inability to make a decision to increase the debt ceiling until they agree on significant budget cuts. In fact, the debt ceiling has already been increase three times during Obama’s presidency, twice in 2009 and once in 2010 when both the House and Senate were led by Democrats.
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During President George W. Bush’s two terms in office, the debt ceiling was raised 7 times, the first time by a Republican-led House and a Democrat-led Senate in June 2002, the second with a Republican majority in both houses less than a year later, and the final time by a Democratic majority in both houses in November 2008. During Bush’s tenure, the debt ceiling was increased from $5.95 trillion to $11.315 trillion.
Historically, both Republican and Democratic leaders have witnessed significant increases to the debt ceiling during their tenure, with lawmakers in both parties coming together to make decisions. During President Clinton’s eight years in office, the debt ceiling was raised four times, from $4.145 trillion to $5.95 trillion, an increase of 43.5%, while the debt ceiling was raised a total of 17 times during President Reagan’s two terms, tripling from $935.1 billion to $2.8 trillion. Even George H.W. Bush saw the ceiling increased four times during his single term in office. Not including the current administration, 16 presidents have served a total of 23 terms in office since the Second Liberty Bond Act was passed. In that time, the debt ceiling was raised 74 times, averaging 3.22 increases per term — nearly once a year.
In that time, the closest the government ever came to default was a last minute deal in 1979. Though the deal was finalized in time, computer malfunctions led to $122 million in Treasury payments being delayed, technically amounting to temporary default and thus permanently increasing interest rates by 0.6%, resulting in $12 billion in additional annual debt payments, costing the government roughly $384 billion to date. We can only imagine the toll a default, even temporary, could take on today’s economy.
Though majority leadership in both the House and Senate was continually fluctuating, with divisions within and between Houses, between the legislative and executive branches, members of each party, no matter how they were divided or which group was in control, managed to increase the debt (NYSE:TLT) ceiling, while avoiding default, a grand total of 77 times to date.