In December 2021, Congress raised the nation’s debt ceiling by $2.5 trillion so that the federal government would not default on its financial obligations. President Joe Biden signed the bill into law, ensuring that the U.S. will make good on its fiscal commitments into 2023.
However, the contentious lead-up to the bill’s passage left many questioning the effectiveness and necessity of a U.S. debt ceiling. Initially created to help constrain the nation’s borrowing, the U.S. debt ceiling defines the amount of money the U.S. government can borrow to pay its obligations, including Social Security and Medicare benefits; military and civilian salaries; interest on the national debt; tax refunds; and other types of payments. The limit has been raised regularly since 1960.
In fact, Congress has acted 78 times since then to raise, temporarily extend or even revise the definition of the debt ceiling, which is now approaching $29 trillion. Raising the ceiling does not authorize new government spending or debt but instead allows the government to make good on financial commitments that Congress had already made.
The risk of not raising the ceiling is default, which could lead to a recession and place the U.S. dollar’s role as the world’s reserve currency at risk, as U.S. Treasury Secretary Janet Yellen warned before this most recent increase. While Democrats and Republicans have supported raising the debt limit over the last several decades, growing partisanship in Congress has made passing legislation on the debt ceiling increasingly cumbersome and risky.
Members of the minority party increasingly see the debt ceiling as a problem for the White House’s party to solve. For example, the recent debt ceiling bill was largely supported by Democrats and passed the House by a vote of 221 to 209 before heading to President Biden’s desk. Before moving through the House, the bill narrowly passed the Senate by a vote of 50-49. Republicans, however, had agreed to a unique maneuver that allowed Democrats to raise the ceiling with a simple majority vote, rather than the 60 votes necessary to overcome a filibuster.
House Budget Committee Chairman John Yarmuth (D-Ky.) has been vocal in support of eliminating the debt ceiling to avoid similar close-call situations. “I mean, it’s been in effect for 100 years, and it certainly hasn’t constrained the debt in any way,” Yarmuth told reporters in February 2021. “All it’s done is open up opportunities for mischief and brinksmanship.”
Political maneuvering was evident in the run-up to the 2021 debt ceiling bill when Republicans put the onus on Democrats to pass the bill given their near-majority support of Biden’s $1.75 trillion Build Back Better plan, which would add to the nation’s growing debt. For example, while most Republicans voted no on the bill to raise the nation’s debt ceiling, some, like Sen. Lisa Murkowski (R-Alaska), did vote to make it easier for Democrats to pass the legislation by voting in favor of a measure that lowered the voting threshold on the debt limit bill to a simple majority, which eliminated the opportunity for Republicans to use a filibuster to block the legislation.
While she told reporters that voting yes on that measure was “the right thing to do” because America defaulting on its obligations would send a bad signal to the rest of the world, Murkowski later voted no on the debt limit bill. While Yarmuth believes “the most sensible” approach to avoiding similar situations in the future, and thus a potential default, is to eliminate the debt ceiling, he’s also said that he doesn’t believe that such a move would get enough support in Congress.
He and Rep. Brendan Boyle (D-Pa.) instead introduced an alternative solution in September 2021 that would transfer the authority to raise the debt limit to the U.S. treasury secretary. Some supporters of that bill believe it could have some bipartisan support given that Senate Minority Leader Mitch McConnell (R-Ky.) suggested transferring the authority to the president in 2011.
Another solution that has been proposed is for the treasury secretary to mint a $1 trillion platinum coin that would be deposited into the Federal Reserve and used by the government to pay down the nation’s debt. Current Treasury Secretary Yellen is opposed to the idea, however, and has stated that she does not think people should take it seriously. “It’s really a gimmick,” she said in an interview on CNBC.
Whether or not the debt ceiling is eliminated, tension over funding the government’s obligations is likely to continue around the 2022 midterm elections as both parties vie for fiscal control.
