The Debt Limit Can Save Us From Ourselves

In 1917, Congress first created what is commonly known today as "the debt limit." The Second Liberty Bond Act authorized the secretary of the Treasury "to borrow, from time to time, on the credit of the United States" a sum "not exceeding in the aggregate $7,538,945,460."

Today, many, many debt limit hikes later, Treasury Secretary Tim Geithner is authorized to borrow up to an amount 2,000 times that sum; $16,394,000,000,000, to be exact. But apparently, even that isn't enough. Geithner informed Congress on New Year's Eve that unless they raised the debt limit again, he would be unable to pay all of the federal government's bills.

It was not always this way. Until World War I, when President Wilson needed cash to fund U.S. intervention in Europe, Congress separately and specifically authorized each issuance of federal government debt. For example, when the United States declared war on Spain in 1898, it also passed the War Revenue Act, which directed the Treasury secretary to issue $100 million in short-term notes and $400 million in longer-term bonds.

But President Wilson did not want to go back to Congress to authorize every specific detail of every specific debt sale for his war and other domestic efforts. Hence the 1917 act granting the Treasury secretary the authority to borrow at "such sum or sums that in his judgment may be necessary."

More