The Federal Debt Ceiling

History of the Debt Ceiling

History of the Debt Ceiling

The U.S. Treasury was established in 1789 by an act of congress. The US treasury consists of a Department offices and operating bureaus. The department offices handle the policy making and management of the treasury and the bureaus handle specific operations such as the IRS which is in charge of tax collections and the bureau of engraving and printing who is in charge of printing and minting all US money.
The primary task of treasury includes:
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Collection of taxes and custom duties
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The payment of all bills owed by federal government
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Printing and minting of US notes and US coinage and stamps
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Supervision of State banks
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Advising government on both national and international financial, monetary, trade and tax legislation
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Enforcement of government laws including taxation policies
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Investigation and federal prosecutions of tax evaders, counterfeiters and forgers
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Management of federal accounts and the national public debt
The government creates budgets to see how much the country needs to spend to run the nation.
When the government spends more than it takes in in revenue it runs a deficit (the difference between the amount of money in revenue and the amount actually needed to spend.
Revenue $1,000,000
Spending $2,000,000
Deficit -$1,000,000
Public Debt $1,000,000 borrowed to make up the deficit + interest
In order to finance the deficit the government borrows from the public.
The debt ceiling was first enacted in 1917 when congress passed the second liberty bond act. Congress set separate limits on categories of debts such as bonds and certificates of indebtedness. In 1939 the congress established a debt ceiling on almost all public debt and has continued ever since. Removing separate limits on debt and imposing one debt limit for almost all debt gave the treasury more flexibility to handle the nations finances. Essentially the congress gave over its constitutional power to control the debt to the treasury.
The debt limit was raised several times during WWII and the limit at the end of WWII was
$300 billion. The debt limit was reduced to $275 billion after WWII. The debt ceiling level remained at
$275 billion until 1954. The Korean war was financed by higher taxes rather then debt from 1950-1953.
The debt limit was raised seven times and reduced twice between 1954 and 1962. It took until 1962 to raise the debt limit to $300 billion The limit that was set at the end of WWII.
Congress has enacted 74 measures to raise the debt limit from 1962 until now. The current debt ceiling limit is $14.294 trillion and current debt is $14.243 trillion.