The debt ceiling is the maximum amount of money the United States can borrow cumulatively by issuing bonds. The debt ceiling was created under the Second Liberty Bond Act of 1917 and is also known as the debt limit or statutory debt limit. It came into the picture as the cost of war at such a big level was unknown. If U.S. government national debt levels bump up against the ceiling, the Treasury Department must resort to other extraordinary measures to pay government obligations and expenditures until the ceiling is raised again. This largely came Into existence because Then the US government was anxious about increasing debt on government. But now it is becoming one weapon in hands of the majority in the House of Representatives. In early format, it came into the picture during Woodrow Wilson. Become more formalized during the time of FDR. Now becoming a weapon in hands of the republican party. But introduced by Democrats.
The debt ceiling has been raised or suspended numerous times over the years to avoid the worst-case scenario, which would be a default by the U.S. government on its debt. Most of the time when the debt ceiling was raised, A republican was in the white house. But still, I can say that It is always Republicans who largely use that as a weapon against a Democrat president with the Republican majority in the house. or should I say, when the majority is with a different Party, the President’s Party because even Donald trump shut down his government. Barack Obama’s government came close to default but his skills made possible the deal with the Republican House Speaker. When Nancy Pelosi was the speaker during Donald trumps time, Democrats cooperates saying this is responsible. But was that always the picture?
The fight here is a Way of thinking. The Republican party thinks that Big government spending is something not acceptable, Expenditure should be cut and reduced. Government should not be playing a big role and have social security and health care etc. Democrats believe that some things are needed and so they should be done by the government for the people. It is always the role of the House of Representatives to approve the budget and expenditure.
But the fight on the debt ceiling start first time during IKE aka Dwight Eisenhowers’ request in 1953. Since 1960 debt limit was increased by 78 times. Generally, it is supposed to be a non-issue but somehow it become an event after the Presidency of Barack Obama. and I didn’t blame anyone. The first time the debt ceiling went above 1 trillion was during Ronald Reagan. On just the 16th day of his presidency, he came to national television and asked to raise. In 1985, When Government reached, the first-time government went for an extraordinary measure like selling its investment. using cash which is already there. Ronald Reagan holds the record more than 12 times increasing the debt ceiling. 1995, 96 saw a brief government shutdown when Congressional Republicans refused to raise the Debt ceiling. this is more like as income is not coming, reduce expenditure. But when your expenditure is less, your growth is also less. The debt ceiling has raised a total of 7 times (total increase of $5365bil) during Pres. Bush’s eight-year term. Not at all shocking. So what is the issue? why now is the fight?
Let’s go to 2011 and 2013. Reminder, 2011 debt crisis led to the downgrading credit rating of the United States.
In 2011, there was a contentious debate over raising the debt ceiling, as the government had reached its legal limit and needed to borrow more money to continue paying its bills.
The debate over raising the debt ceiling in 2011 was highly political, with Republicans and Democrats locked in a stalemate over how to address the issue. Republicans, led by House Speaker John Boehner, argued that any increase in the debt ceiling should be accompanied by a corresponding reduction in government spending. Democrats, on the other hand, argued that the debt ceiling should be raised without any accompanying spending cuts.
As I am writing about US Presidents, I can say that Today’s democratic party is largely medium to left-leaning. They are not left. They are medium. The Republican party is Right-leaning. So They don’t want to spend on anything like Social security, Obamacare, and all.
while I was going through all documentaries and processes for writing this post, one thing I agreed with some people who said, John Boehner wasn’t aware of what is coming toward him. If the United States breached its debt ceiling and were unable to resort to other “extraordinary measures”, the Treasury would have to either default on payments to bondholders or immediately curtail payment of funds owed to various companies and individuals that had been mandated but not fully funded by Congress. Both situations would likely have led to a significant international financial crisis.
On July 31, 2011, two days before when the Treasury estimated the borrowing authority of the United States would be exhausted, Republicans agreed to raise the debt ceiling in exchange for a complex deal of significant future spending cuts. The crisis did not permanently resolve the potential for future use of the debt ceiling in budgetary disputes, as shown by the subsequent 2013 debt-ceiling crisis.
The credit downgrade and debt ceiling debacle contributed to the Dow Jones Industrial Average falling 2,000 points in late July and August. Following the downgrade itself, the DJIA had one of its worst days in history and fell 635 points on August 8. The Bipartisan Policy Center extended the GAO’s estimates and found that the delay raised borrowing costs by $18.9 billion over ten years
The 2011 debt ceiling debate was a reminder of the political challenges that the United States government faces in addressing its long-term financial issues. It also highlighted the importance of finding a balance between reducing the deficit and maintaining government services and programs that are essential to the well-being of the American people. However, it also led to the first-ever downgrade of the US credit rating by Standard & Poor’s, which was a major blow to the country’s reputation and economy.
The 2013 debt ceiling crisis was a political showdown between the Obama Administration and the Republican-controlled House of Representatives over the United States borrowing limit. The crisis began in May of 2013 when the Treasury Department announced that the government would reach its debt limit of $16.4 trillion by October of that year.
The Republican-led House of Representatives, led by Speaker John Boehner, demanded that the debt limit be raised only if the Obama Administration agreed to significant spending cuts. The Administration, on the other hand, argued that the debt limit should be raised without any accompanying spending cuts. The impasse led to a government shutdown from October 1 to October 17, 2013, as Congress was unable to pass a budget.
During the shutdown, many government services were suspended and hundreds of thousands of federal employees were furloughed. The crisis was resolved on October 17th, 2013, when Congress passed a bill to temporarily raise the debt limit and reopen the government.
This was more like part 2 of the 2011 crisis or should I say, one way for the Republican party to show Barack Obama that they are not interested in cooperating with him. It led to a government shutdown and had negative consequences for the country’s economy and reputation. It also highlighted the ongoing challenges that the United States faces in addressing its long-term financial issues and finding a balance between reducing the deficit and maintaining essential government services and programs. In my view, it leads to highlighting why Bipartisanship in some cases like the debt ceiling crisis and the government shutdown is not something that anyone wants.
Right now we are at a level, where the Republican party is in majority but not so much so that they may have a free hand. So fractions among them are proving the hurdle. and as Barack Obama and Bill Clinton highlighted their speech during all such events no government liked to see the rating of the United States go down. and so the House of Representatives shud act quickly.
