The truth about the national debt ceiling

President Biden and the House Republican leadership are on a collision course over the national debt limit. Here’s a guide to the facts.
What is the national debt?

This is money that the United States borrowed over time, starting with the Revolutionary War, to fund expenses. Only occasionally in the past half-century has the government run a surplus in a fiscal year, meaning revenue exceeded spending.

he federal government often runs up larger deficits during times of war, recession and national emergencies such as the recent pandemic.

The debt thus represents past spending, just like purchases on a credit card. You can’t just rip up the bill and ignore it, even if you try to restrain your future spending.

Why does the United States have a debt limit?

It started with a war.

In the early decades of the republic and through the 19th century, Congress preferred to issue debt for specific purposes, such as issuing bonds to build the Panama Canal. But World War I was a conflict with unknowable costs, making targeted legislation difficult. At first Congress established a $5 billion limit on new issues of bonds, along with the immediate issuance of $2 billion in one-year certificates of indebtedness, in the First Liberty Loan Act of 1917. But very quickly another law was needed — the Second Liberty Loan Act of 1917 — in which Congress set a general limit on borrowing: $9.5 billion in Treasury bonds and $4 billion in one-year certificates.

For two decades, future increases in the national debt were simply amendments to the Second Liberty Bond Act. But it was not until 1939 — during the Great Depression and on the eve of World War II — that Congress eliminated all the different limits on types of bonds, thus creating an overall aggregate limit on the amount of money the U.S. government is authorized to borrow to meet existing obligations. That law is the basis for the debt limit today, currently set for $31.381 trillion.

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