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United States of America Debt and arguments about it For its entire existence.
There were only two years in US history when no The amount of debt came as then-President Andrew Jackson blew up the banking system Panic of 1837 And a major depression.
In recent decades, disagreements over raising Debt ceiling (the maximum amount of money the Treasury is allowed to borrow to pay its bills) has increased with the size of the national debt. The country will likely reach its debt ceiling on Thursday, which currently stands at $31.4 trillion.
There’s no denying that the size of the debt is alarming, and not just because $31 trillion-plus is an eye-popping figure.
Economists prefer to measure the debt as a percentage of gross domestic product, or GDP, a broad measure of the US economy. After pandemic recovery costs, debt is about 120% of GDP, According to official statistics. That’s historically high – higher than since World War II – but whether it’s a problem is moot A lot of controversy.
The so-called “extraordinary provision” — the Treasury Department’s equivalent of transferring money to pay interest — will give Congress and President Joe Biden until about June to come to an agreement on how To increase the loan limit.
Related: CNN’s Tami Luhby explains the extraordinary arrangement
However, there are indications of how this showdown will play out politically From other recent debt freezes, there’s reason to believe this time could be different — a larger portion of GOP lawmakers seem willing to allow the country to default, and Biden seems unlikely to enact the kind of spending cuts that would satisfy them.
In 1995 and 2011, the most recent major fiascos on debt and spending occurred under Democratic presidents who lost control of the House to Republicans.
It just so happens that we’re in that exact situation now, albeit with barely a GOP majority instead of the strong ones enjoyed by then-House Speakers Newt Gingrich (in 1995 and 1996) and John Boehner (in 2011 and 2012). .
These past examples likely provide a guide to what lies ahead as current Speaker Kevin McCarthy tries to cut spending beyond Biden.
Using the debt ceiling as leverage was a relatively novel idea when Republicans took control of the House in 1995. then backThe debt was less than $5 trillion and a little less than 65% of GDP.
The debt ceiling was originally covered in a spending bill. There was eventually a government shutdown but for a time there was no default on the national debt The story of the year In which the Republicans eventually blinded by the use of debt.
The then President Bill Clinton at one point accused Gingrich of blackmailing him over spending and vetoed raising the debt ceiling. they are Finally agreed To increase the credit limit after a separate spending bill is enacted. They also held hands on balancing the federal budget with cuts and a roaring US economy before the tech bubble burst.
Tax cuts enacted by Clinton’s successor, George W. Bush, and the post-9/11 wars ended a brief era of balanced budgets. That a balanced budget barely affected the national debt at the time is another story.
During the subsequent debt freeze during the Obama years, Clinton suggested The President should invoke new powers in the 14th Amendment and remove Congress from the debt ceiling equation.
Boehner and then-President Barack Obama sparred over the spending and debt ceiling for years starting in 2011, when the debt was about $16 trillion, or about Half of what it is today.
Boehner and Obama agreed to across-the-board spending cuts as an incentive to reach a broader agreement on controlling deficit spending — the Budget Control Act of 2011 — but failed to reach that broader agreement before Boehner was forced out of the speakership and Obama left office. It was an unpopular solution, and it took years for lawmakers to finally end the spending cap system.
Meanwhile, the country came close to defaulting on Standard & Poor’s in 2011 US credit rating downgrade, where it tends to be AA+ rather than top-tier AAA. It signaled to the world that the United States, long considered the safest place in the world to invest money, might not make good on its debt obligations (other major rating agencies warned of a debt ceiling crisis but never downgraded the U.S. credit rating). The S&P move temporarily sent the stock market lower.
Then-Senate Majority Leader Mitch McConnell got creative, suggesting that the president would be able to raise the debt unless both houses of Congress voted to override his decision. That was the method Used in 2013.
In 2013, lawmakers voted for the first time Suspending rather than increasing the loan limit.
These suspensions of the debt ceiling recur every few years, in addition to separate spending fights due to a series of partial government shutdowns during the Obama and Donald Trump years. When Biden takes office in 2021, Republicans bounce back Insisting on raising the credit limit rather than postponing it.
Here’s a better timeline Center for Bipartisan Policy.
Democrats have shown no interest in using the debt ceiling to force change, even with Republican presidents.
Under Ronald Reagan and George HW Bush, they used Gephardt ruleNamed for former Rep. Richard Gephardt, to automatically attach the debt ceiling to spending bills.
In recent years when they controlled the House (2007–2010 and 2019–2022), tax cuts and costly wars that also drove deficit spending, Democrats worked to raise the debt limit as needed under then-President George W. Bush. Bush and Trump.
And Republicans, when there’s a GOP president like Trump, haven’t made much of an issue of the debt — even though now Trump is encouraging fellow Republicans to use the debt to exact spending cuts from Biden.
If 1995 and 2011 The example is a guideline, eventually there will be some kind of agreement to reduce some kind of cost. And the drama will continue for months as the Treasury Department exhausts extraordinary measures, which could last until June.
Annual government funding does not end until the end of September.
These two issues—the debt ceiling and government funding—have often been tackled together. In any event, 2023 is going to be a year focused on debt and spending.
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