Public debt is a fact of life. In 1790, Alexander Hamilton wrote, “The United States debt, foreign and domestic, was the price of liberty” (First Report on the Public Debt). In 1917, the Second Liberty Bond Act included an aggregate limit on federal debt, and in 1939, a general limit was placed on federal debt.
It only began to be a controversial issue in the twenty-first century – even though it has been changed 14 times since 2001. It has recently been increasingly used for political leverage. And, in fact, political wrangling over the debt limit has become part of the fiscal battle in Congress since 2011 when the tactic was first used.
In October 2013, Congress suspended the debt limit until February 2014. It was then suspended until March 2015, which allowed further spending that could increase the debt. As each deadline neared, the Treasury department used a variety of means to pay the bills – without exceeding the limit – to prevent a government shutdown.
The administration has maintained that it will not negotiate over the debt ceiling since it consists of monetary obligations already approved by Congress and should be raised when necessary. Failure to raise the debt limit could prompt a credit-rating downgrade, could slow an already tepid economic recovery by damaging the confidence of businesses, investors and consumers, and could be especially harsh on those who are poor because there would be no funding for the programs they would desperately need.