Celebrating ten years of productive partisanship.

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BPC has compiled a timeline of notable events in the history of the debt limit from its inception 100 years ago.

Scroll down to see events as they occurred, and select “Read More” for a detailed description of what happened at each juncture. Find further BPC analysis and explanation of the debt limit here.

  1. Prior to World War I, Congress maintained tight control over federal borrowing. Congress not only authorized each instance of debt issuance but also specified the instruments and parameters under which the Treasury could borrow (including interest rates, bond maturities, etc.). The Second Liberty Bond Act of 1917 gave the Treasury much more flexibility in managing federal finances by not restricting the purpose for which new debt was issued.

    April 1917

     

  2. Congress consolidates limits on specific forms of debt (e.g., separate caps on bonds and shorter-term debt) into one aggregate debt limit. The first federal debt limit is set at $45 billion and gives the Treasury Department wide discretion over what borrowing instruments to use so long as total debt does not exceed that level.

     

  3. Throughout World War II, Congress raises the debt limit annually to sufficiently cover all borrowing incurred by the war, reaching a peak of $300 billion. By the end of the war, in June 1946, the debt limit is lowered to $275 billion as war costs dissipate and the federal government begins to run three years of surpluses. The federal debt limit remains unchanged at this level for eight consecutive years – the longest such period since its inception.

    June 1946

     

  4. Congress approves a temporary debt limit increase to help finance the Korean War. President Dwight Eisenhower had been requesting such an increase since his State of the Union in 1953, but because the war effort was largely funded without requiring borrowing, Congress withheld an increase for well over a year. Congress passes two additional temporary debt limit increases over the course of the next three years.

     

  5. When the temporary increases expire, the debt limit reverts to $275 billion (its level shortly after World War II) following the refusal of Congress to grant Eisenhower renewed borrowing authority. Congress waits for more than six months to again increase the debt limit as a means to pressure the Eisenhower administration to exercise more fiscal restraint in the Defense Department. During this six-month period, the Air Force ceased to pay its bills for a short period of time.

    July 1957

     

  6. Congress passes the Congressional Budget and Impoundment Control Act of 1974, creating the modern congressional budget process. The law gives Congress new tools to control spending by the executive branch.

     

  7. Congress raises the federal debt limit with little time to spare before the federal government would have defaulted on payments for the first time in modern history. Technical and operational challenges that may or may not have been related contribute to a backlog at the Treasury Department resulting in delayed payments on about $122 million in Treasury bills. One study found that this small “technical default” resulted in a permanent 60 basis point (0.60 percentage point) increase in interest rates on U.S. government debt. Other analysis contradicts this finding, suggesting that changes in monetary policy, which happened over the same period, may have caused the interest rate increase.

     

  8. The “Gephardt Rule,” named after House Majority Leader Dick Gephardt (D-MO), is adopted by the U.S. House of Representatives. The rule allows the House to automatically raise the federal debt limit via the passage of a budget resolution (without requiring a separate vote). For the first time, this procedure directly links federal borrowing authority to the budget decisions that required such borrowing. Before being repealed in 2011, the Gephardt Rule is used to pass 15 increases in the federal debt limit.

     

  9. The federal debt limit is officially codified into law. Prior to this point, all changes in the federal debt limit were legislated as amendments to the Second Liberty Bond Act of 1917.

     

  10. Upon reaching the debt limit during a political impasse over how to address it, the Treasury Department for the first time implements so-called “extraordinary measures,” accounting maneuvers that allow the government to continue meeting federal obligations. The measures deployed on this occasion include temporarily “disinvesting” certain federal accounts, such as the retirement fund for federal employees and the Social Security trust funds. These actions are taken in such a way that they do not jeopardize Social Security or other federal benefit payments.

    The Government Accountability Office later finds that the Treasury Department’s actions appear to be in violation of the Social Security Act, but that given the extenuating circumstances, the Treasury Secretary has not acted unreasonably. 

    September 1985

     

  11. The debt limit is permanently increased from $1.9 billion to $2.1 billion, ending the 1985 debt limit impasse.

     

  12. Policymakers formally authorize the Treasury Secretary to use extraordinary measures. The legislation legally permits the Treasury Secretary to depart from normal investment practices for certain trust funds in order to prevent the federal government from exceeding the debt limit. This authority does not include the Social Security trust funds.

     

  13. Nearing a breach in the debt limit, Congress passes a bill granting Treasury temporary special borrowing authority (i.e. not subject to the debt limit) to ensure that Social Security payments are made on time for the month of March. Congress ultimately raises the debt limit in late March.

     

  14. Following a lengthy government shutdown, the debt limit is increased to nearly $6 trillion as part of the Balanced Budget Act of 1997. Other provisions in the legislation contribute to four consecutive years of federal budget surpluses, negating the need for lawmakers to raise the federal debt limit for several years.

    August 1997

     

  15. The era of balanced budgets comes to an end as policymakers return to deficit spending. The debt limit is increased to $6.4 trillion – the first increase since 1997.

     

  16. The United States reaches its statutory debt limit of $14.3 trillion. As on several earlier occasions, the Treasury Secretary begins deploying extraordinary measures. The “X Date,” when those measures are projected to be exhausted and Treasury runs out of cash to pay its bills in full and on time, is expected in early August 2011.

     

  17. Senate Minority Leader Mitch McConnell (R-KY) proposes a possible debt limit fix dubbed the “McConnell Rule.” Under McConnell’s plan, the president would have the authority to propose an increase to the debt limit that would go into effect unless both houses of Congress voted to override. Thus, Congress would still have the authority to reject the increases by vote, but would not need to approve them.

    July 2011

     

  18. Just days before the projected “X Date,” Congress and the president enact the Budget Control Act of 2011, which initiates discretionary spending caps, creates the Joint Select Committee on Deficit Reduction (a.k.a. the super committee), and ends the immediate debt limit impasse by authorizing a two-stage increase in the debt limit to $16.4 trillion via the McConnell Rule. This episode results in a downgrade of the U.S. credit rating by S&P from AAA to AA+. S&P cites political brinkmanship as the reason for the downgrade.

    August 2011

     

  19. The United States reaches the statutory debt limit of $16.4 trillion, established by the Budget Control Act of 2011. The Treasury begins taking extraordinary measures to postpone default, with the “X Date” expected in February 2013.

    December 2012

     

  20. Policymakers pass the No Budget, No Pay Act of 2013, suspending the debt limit through May 18, 2013. The reinstated debt limit on that day is to be set at a level that accounts for all debt incurred to that point. This episode is the first time in the debt limit’s history that it is addressed via a temporary suspension rather than a specified numerical increase in the limit.

     

  21. The statutory debt limit, suspended by the No Budget, No Pay Act of 2013, is reinstated at $16.7 trillion. The Treasury resumes its extraordinary measures to avoid defaulting on federal obligations. The “X Date” is expected in the fall of 2013.

    May 2013

     

  22. The federal government undergoes a 16-day partial shutdown after Congress fails to enact either appropriations bills or a continuing resolution, the result of disagreements surrounding funding for the Affordable Care Act. The shutdown ends when President Obama signs the Continuing Appropriations Act of 2014 on October 16, just weeks away from the projected “X Date.” The act provides a temporary solution to the government funding impasse and also suspends the debt limit until February 7, 2014. Concerned about continuing political brinkmanship around the debt limit, the Treasury Department publishes a report detailing the possible consequences of a default on U.S. obligations.

    October 2013

     

  23. The suspension of the statutory debt limit expires, and the debt limit is reinstated at $17.2 trillion. Treasury begins implementing extraordinary measures to finance the federal government on a temporary basis. Due to the large amount of tax refunds that are sent out in February, the “X Date” is expected less than a month from when extraordinary measures are initiated. Shortly after the reinstatement, President Obama signs the Temporary Debt Limit Extension Act, which suspends the debt limit through March 15, 2015.

     

  24. The latest suspension of the statutory debt limit expires and the debt limit is reinstated at $18.1 trillion. Treasury begins implementing extraordinary measures in order to finance the federal government on a temporary basis. The X Date is expected in the fall of 2015.

     

  25. Only a few weeks away from the X-Date, policymakers pass the Bipartisan Budget Act of 2015, which suspends the statutory debt limit through March 15, 2017. The act also loosens the spending caps on defense and domestic discretionary spending.

    November 2015

     

  26. The debt limit suspension expires and the debt limit is reinstated at $19.8 trillion. Treasury begins to implement extraordinary measures to finance the federal government on a temporary basis. The “X Date” is expected sometime in the fall of 2017.

     

  27. Only about a month away from the projected “X Date,” Hurricane Harvey strikes the United States, increasing pressure on policymakers to avoid a protracted government shutdown or debt limit standoff.

    August 2017

     

  28. In the aftermath of Hurricane Harvey, policymakers negotiate a three-month budget deal, which includes both a Harvey relief package and a debt limit suspension. The legislation is passed on September 8, suspending the debt limit until December 8, 2017, and maintaining current spending levels.

     

 

 

 

 

Further Reading:

BPC’s Debt Limit Analysis

Recent History of the Debt Limit

The Debt Limit at 100