30

In the United States, the debt ceiling limits how much money the federal government can borrow. This ceiling was apparently introduced in 1939.

Why does the debt ceiling exist? Congress approves the federal budget anyway; the debt ceiling does not limit Congress from passing a budget that requires the government to exceed the debt ceiling. At that point, congress is already approving how much the debt is expected to increase, so the debt ceiling would seem entirely redundant. Then what's the point of having a debt ceiling, that apparently needs to be passed separately from the budget (and so far, always has been raised whenever needed)? Why isn't the difference in budgeted income and expense considered an implicit authorisation to borrow the difference?

Answers to the linked question do not address the redundancy of the debt ceiling compared to the budget.

12
  • 6
    Have you checked Wikipedia? It seems to answer your question. I would post an answer based on it but I am not sure it's worthwhile.
    – Relaxed
    Oct 7 at 8:33
  • @Relaxed That doesn't seem to state clearly why the US has a legislative limit on the amount of national debt that can be incurred by the U.S. treasury. I'd expect that the government is bound by the budget passed in congress, which already implies how much is expected to be borrowed; it just states that it is so.
    – gerrit
    Oct 7 at 10:26
  • 1
    Obviously, it's a very antiquated system, Congress could presumably vote to get rid of it once and for all, and it feels disingenous for one party to claim to care about debt or hang it over the other party's heads when the need to issue debt results from their own action in government but that has nothing to do with why and how the debt ceiling came to be.
    – Relaxed
    Oct 7 at 13:12
  • 2
    @Barmar No, it's completely unrelated. Congress already approves government borrowing by passing a budget where spending exceeds borrowing. The additional authorisation to borrow the difference is entirely redundant. The bank does not approve my personal budget. Almost no country in the world has a "debt ceiling"; they might have other mechanisms to limit debt such as constitutional limits, but that would make passing a budget that exceeds those itself unconstitutional, which doesn't seem to be the case in the US (Congress can legally pass a budget that breaches the debt ceiling).
    – gerrit
    Oct 7 at 21:44
  • 2
    @Barmar I think a better analogy is if you tried to control your spending by putting a limit on how much you’ll pay to your credit card company each month, instead of a limit on how much you spend.
    – divibisan
    Oct 7 at 22:37
22

Because... history. "The government" isn't one single entity. The debt limit affects the treasury specifically. As Wikipedia explains.

Between 1788 and 1917 Congress would authorize each bond issue by the United States Treasury by passing a legislative act that approved the issue and the amount.

Congress basically gave up that fine-grained control (over each bond issue) only because of WWI. Thereafter only an overall limit was set. The number of votes to has change the limit varied over time since then. There were more votes after 1960, sometimes several per year, because both suspension of the limit and increases were done. In this perspective, Congress has exercised more control post 1960s, but still less than before 1917 when they were approving roughly each bond issue.

The story from Wikipedia is actually slightly oversimplified. According to a CRS report, around WWII there were more changes:

The Constitution grants Congress the power to borrow money on the credit of the United States— one part of its power of the purse—and thus mandates that Congress exercise control over federal debt. Control of debt policy provides Congress with one means of expressing views on appropriate fiscal policies.

Before 1917 Congress typically controlled individual issues of debt. In September 1917, while raising funds for the United States’ entry into World War I, Congress also imposed an aggregate limit on federal debt in addition to individual issuance limits. Over time, Congress granted Treasury Secretaries more leeway in debt management. In 1939, Congress agreed to impose an aggregate limit that gave the U.S. Treasury authority to manage the structure of federal debt.

I suppose your real questions is why the US adopted this practice in 1788 and has kept it on one form or another. The 1788 question is probably better on history SE.

As for what's proposed as explanation in FrederikVds' answer... I'm not sure I buy it entirely, but there is a rough correlation between when detailed budgeting was introduced (1921) and when Congress gave up on approving each bond issue (1917):

The U.S. Constitution (Article I, section 9, clause 7) states that "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of Receipts and Expenditures of all public Money shall be published from time to time."

Each year, the President of the United States submits a budget request to Congress for the following fiscal year as required by the Budget and Accounting Act of 1921.

So there was probably a transition from one form of fine-grained Congress control (bond based) to another (budget line-item based) around WWI.

According to one 1996 paper between 1917 and 1996 the federal debt limit had been raised or suspended 80 times (64 times between 1960 and 1996). According to a 2017 Reuters article, the precise number of such actions 1960-2017 was 79. I cannot easily verify what's claimed in FrederikVds' answer that there was a substantial period of (post-1917) time when Congress didn't have to approve at least annually such a measure. It's possible they had some gentlemen's agreement and auto-raised it, but there was a formal act more than once per year, on average, according to the statistics. The distinction seems to be that no separate vote took place, but a measure to raise or suspend the debt was included in some other larger bill when Democrats controlled the House:

The Gephardt Rule is a component of the overall House Rules that Democrats use when they control the chamber. When Republicans have been in the majority over the last 40 years, as they were from 1995 to 2007 and again from 2011 to 2019, the GOP repealed this rule and required separate votes on the debt limit. [...]

The Senate does not have its own version of the rule and therefore still requires 60 votes in order to advance a debt limit resolution.

The finer effects of the Gephardt Rule are detailed in a separate CRS report:

Under the former Gephardt rule, in 11 of the 31 years between 1980 and 2010, the rule was either suspended (1988, 1990-1991, 1994-1997, and 1999-2000) or repealed (2001-2002) by the House. In most years in which the rule was suspended, legislation changing the statutory limit was not necessary—that is, at the time, the existing public debt limit was expected to be sufficient.

During the years in which the rule applied (i.e., in the 20 of the 31 years between 1980 and 2010), the rule led to the automatic engrossment of 20 House joint resolutions increasing the statutory limit on the public debt. In effect, under the rule, in these cases, the House was able to initiate legislation increasing the level of the public debt limit without a separate, direct vote on the legislation. Of these 20 joint resolutions, 15 became law. In 10 of these 15 cases, the Senate passed the measure without change, allowing it to be sent to the President for his signature without any further action by the House. In the remaining five cases, the Senate amended the rule-initiated legislation, requiring the House to vote on the amended legislation before it could be sent to the President.

During this period, the House also originated and considered debt limit legislation without resorting to the Gephardt rule either as freestanding legislation, as part of another measure, or as part of a budget reconciliation bill. Of the 47 public debt limit changes enacted into law during the period 1980-2010, 32 were enacted without resorting to the Gephardt rule, each requiring the House to vote on such legislation. In total, between 1980 and 2010, the rule effectively allowed the House to avoid a separate, direct vote on 10 of the 47 measures changing the debt limit that were ultimately enacted into law.


I didn't want to get into this as veering a fair bit from the main topic and also is a rather long story, but since people have follow-up questions (and the image painted in the other answer is rather terse):

  • When the US was formed it really had just a "congressional budget". The Treasury reported directly to Congress by the law passed soon thereafter. Government agencies that were eventually formed received their separate budgets each mainly drafted/approved by various Congressional committees that had little coordination with each other.

  • There was a substantial Progressives move toward 1900 to have an European-style executive budget in the US. One milestone was president Taft's proposal via a commission he appointed in 1911-12. These changes/proposals were under the banner (to paraphrase from later president Wilson's words) that Congressional committees had become the true ministers and that executive ministers were merely their clerks robbing the executive of most its powers. (Taft himself was apparently not incredibly sold on the idea, but he allowed the commission as a way to placate and gain support of the Progressive wing of the Republican party.)

  • Wilson wanted a hierarchically structured budget driven by one executive vision, but he actually wanted it on terms that Congress could not agree with. Congress sent him a version of the budget law that Wilson vetoed, seemingly because it didn't allow him to fire the comptroller. (This newly introduced [at federal level] post oversaw the newly created GAO which oversaw the auditing processes.) Wilson's successor, president Harding was more compromising in terms of the balance of powers; he was in fact a proponent of the version that passed during his presidency. The 1921 law was also a compromise in that it allowed Congress to amend the initial executive budget proposal.

  • The 1921 budget law still had issues it didn't fully address like impoundments (the executive's ability to not actually spend money that Congress allocated for a given purpose), which were still being solved on a gentlemen's agreement basis. That worked out until president Nixon started to massively [over]use impoundments to block most Congressional programs he disagreed with, impoundments reaching 17%-20% of the budget sum during his presidency. Although elected in a landslide, Nixon was forced to give this unilateral impoundment power by the 1974 act (passed over his veto) that made it necessary for a president to seek congressional approval for longer term impoundments, rather than brief suspensions. There were other changes made to the budgeting process made in that 1974 reform, like the introduction of reconciliation and the more technocratic CBO nominally controlled by the newly created Congressional budget committees, but given a fair bit of independence in practice.

These issues didn't squarely deal with the debt ceiling in any way, but were part of the big picture of budget process reform(s). During the debates on impoundment reform in the 1970s, the Nixon administration did try to paint Congress as "pro-spending" and itself as the more fiscally responsible part of the government, in a sense trying to create a mirror of the debate that on hears from Congress on the debt ceiling. The overall effects of the 1974 act on the balance of powers are still somewhat debated because reconciliation (which was also included in the act) gave the executive the ability to pass its budget with with a narrower majority in Congress (in the Senate in particular), which made the system closer in this regard to European budgeting processes. (Back in Taft commission's days, they were inspired by a Westminster style system in which the failure of a major budget proposal meant the dismissal of the government/executive; but this could not be squared with the US system of a separately elected president. The UK itself moved away from its historical model in 2011, when a law was adopted that makes government dismissal dependent on an explicit [no-]confidence vote, i.e. failure to pass a major budget proposal is no longer equated with automatic government dismissal.)

I wrote this part rather quickly so there won't be inline refs, but I've used these sources:

1
  • "So there was probably a transition from one form of fine-grained Congress control (bond based) to another (budget line-item based) around WWI." Was 1921 actually when Congress first started passing line-item-based budgets or was it just when they started requiring the executive branch to present them a proposal for such a budget (e.g. due to the growing size of the government making it difficult for Congress to figure out what all of the items and numbers needed to be without some help from the executive branch?)
    – reirab
    Oct 8 at 19:12
8

The US Constitution says that only Congress has the power to "borrow Money on the credit of the United States". It also says only Congress has the authority to collect taxes. This was originally understood to give the president wide discretion in what that money should be spent on (as long as it's used to execute the laws set by Congress).

As the centuries passed, this discretion of the president was limited piece by piece, until it was given the final blow in 1974 with the "Congressional Budget and Impoundment Control Act", which firmly established that Congress and Congress alone has the authority to decide the entirety of the budget, including the spending. It however did not amend 31 U.S. Code § 3101, the law by which Congress authorises the government to borrow money. That law still limits the government to borrowing a fixed amount.

Obviously, by setting both the exact amount collected in taxes and the exact amount that should be spent, Congress automatically also sets the debt this will result in. In practice, budget bills set the debt ceiling, and the separate debt ceiling vote, to amend 31 U.S. Code § 3101 to adjust it to the correct number, became a formality. This was made official in the House of Representatives in 1979 with the "Gephardt Rule", which abolished this traditional debt ceiling vote in the House in light of the new budgetary process. The Senate however never took this step, and kept this formality alive.

The separate debt ceiling vote was then reintroduced in the House in 1995 by the Republicans, for the purpose of grandstanding about the same budget a second time. The rule however has always been reintroduced in some form by a Democrat-controlled House.

7
  • 4
    This doesn't seem to line up with en.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling In particular, 1995 was the first time the Republican party leveraged the debt ceiling to trigger a crisis but not the first time a vote took place (even post-1979).
    – Relaxed
    Oct 7 at 8:41
  • @Relaxed I forgot about the Senate. The Gephardt Rule was never part of Senate procedures and so the Senate has indeed always had debt ceiling votes. Edited. Oct 7 at 8:50
  • 1
    But doesn't congress passing a budget in which spending exceeds income imply authorisation to borrow the difference?
    – gerrit
    Oct 7 at 10:27
  • @gerrit I added some extra information to the end of paragraph 2. Looking at strictly the text of the law, no. There is no law that allows the president to borrow more money than the debt ceiling, even if the budget requires him to spend more than he taxes. Of course it would be interesting to see what happens if a president argues in court that Congress is asking him to do two contradictory things. But that hasn't happened yet as far as I know. Oct 7 at 11:03
  • 3
    This account also neglects the fact that a government cannot set the exact amount of taxes collected. It typically decides how taxes are defined and computed but how much it actually gets depends on economic activity (which is itself influenced by government policy obviously). That's why constraining expenses very often does not result in a smaller deficit (and indeed why it is silly to put a ceiling on the amount of debt to be issued).
    – Relaxed
    Oct 7 at 13:17

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .