The Debt Limit Through the Years

April 1917

Prior to World War I, Congress maintained tight control over federal borrowing. Congress not only authorized each instance of debt issuance but also specified the instruments and parameters under which the Treasury could borrow (including interest rates, bond maturities, etc.). The Second Liberty Bond Act of 1917 gave the Treasury much more flexibility in managing federal finances by not restricting the purpose for which new debt was issued.

July 1939

Congress consolidates limits on specific forms of debt (e.g., separate caps on bonds and shorter-term debt) into one aggregate debt limit. The first federal debt limit is set at $45 billion and gives the Treasury Department wide discretion over what borrowing instruments to use so long as total debt does not exceed that level.

June 1946

Throughout World War II, Congress raises the debt limit annually to sufficiently cover all borrowing incurred by the war, reaching a peak of $300 billion. By the end of the war, in June 1946, the debt limit is lowered to $275 billion as war costs dissipate and the federal government begins to run three years of surpluses. The federal debt limit remains unchanged at this level for eight consecutive years – the longest such period since its inception.

August 1954

Congress approves a temporary debt limit increase to help finance the Korean War. President Dwight Eisenhower had been requesting such an increase since his State of the Union in 1953, but because the war effort was largely funded without requiring borrowing, Congress withheld an increase for well over a year. Congress passes two additional temporary debt limit increases over the course of the next three years.

July 1957

When the temporary increases expire, the debt limit reverts to $275 billion (its level shortly after World War II) following the refusal of Congress to grant Eisenhower renewed borrowing authority. Congress waits for more than six months to again increase the debt limit as a means to pressure the Eisenhower administration to exercise more fiscal restraint in the Defense Department. During this six-month period, the Air Force ceased to pay its bills for a short period of time.

July 1974

Congress passes the Congressional Budget and Impoundment Control Act of 1974, creating the modern congressional budget process. The law gives Congress new tools to control spending by the executive branch.

April 1979

Congress raises the federal debt limit with little time to spare before the federal government would have defaulted on payments for the first time in modern history. Technical and operational challenges that may or may not have been related contribute to a backlog at the Treasury Department resulting in delayed payments on about $122 million in Treasury bills. One study found that this small “technical default” resulted in a permanent 60 basis point (0.60 percentage point) increase in interest rates on U.S. government debt. Other analysis contradicts this finding, suggesting that changes in monetary policy, which happened over the same period, may have caused the interest rate increase.

September 1979

The “Gephardt Rule,” named after House Majority Leader Dick Gephardt (D-MO), is adopted by the U.S. House of Representatives. The rule allows the House to automatically raise the federal debt limit via the passage of a budget resolution (without requiring a separate vote). For the first time, this procedure directly links federal borrowing authority to the budget decisions that required such borrowing. Before being repealed in 2011, the Gephardt Rule is used to pass 15 increases in the federal debt limit.

September 1982

The federal debt limit is officially codified into law. Prior to this point, all changes in the federal debt limit were legislated as amendments to the Second Liberty Bond Act of 1917.

December 1985

The debt limit is permanently increased from $1.9 billion to $2.1 billion, ending the 1985 debt limit impasse.

October 1986

Policymakers formally authorize the Treasury Secretary to use extraordinary measures. The legislation legally permits the Treasury Secretary to depart from normal investment practices for certain trust funds in order to prevent the federal government from exceeding the debt limit. This authority does not include the Social Security trust funds.

February 1996

Nearing a breach in the debt limit, Congress passes a bill granting Treasury temporary special borrowing authority (i.e. not subject to the debt limit) to ensure that Social Security payments are made on time for the month of March. Congress ultimately raises the debt limit in late March.

August 1997

Following a lengthy government shutdown, the debt limit is increased to nearly $6 trillion as part of the Balanced Budget Act of 1997. Other provisions in the legislation contribute to four consecutive years of federal budget surpluses, negating the need for lawmakers to raise the federal debt limit for several years.

June 2002

The era of balanced budgets comes to an end as policymakers return to deficit spending. The debt limit is increased to $6.4 trillion – the first increase since 1997.

May 2011

The United States reaches its statutory debt limit of $14.3 trillion. As on several earlier occasions, the Treasury Secretary begins deploying extraordinary measures. The “X Date,” when those measures are projected to be exhausted and Treasury runs out of cash to pay its bills in full and on time, is expected in early August 2011.

July 2011

Senate Minority Leader Mitch McConnell (R-KY) proposes a possible debt limit fix dubbed the “McConnell Rule.” Under McConnell’s plan, the president would have the authority to propose an increase to the debt limit that would go into effect unless both houses of Congress voted to override. Thus, Congress would still have the authority to reject the increases by vote, but would not need to approve them.

August 2011

Just days before the projected “X Date,” Congress and the president enact the Budget Control Act of 2011, which initiates discretionary spending caps, creates the Joint Select Committee on Deficit Reduction (a.k.a. the super committee), and ends the immediate debt limit impasse by authorizing a two-stage increase in the debt limit to $16.4 trillion via the McConnell Rule. This episode results in a downgrade of the U.S. credit rating by S&P from AAA to AA+. S&P cites political brinkmanship as the reason for the downgrade.

December 2012

The United States reaches the statutory debt limit of $16.4 trillion, established by the Budget Control Act of 2011. The Treasury begins taking extraordinary measures to postpone default, with the “X Date” expected in February 2013.

February 2013

Policymakers pass the No Budget, No Pay Act of 2013, suspending the debt limit through May 18, 2013. The reinstated debt limit on that day is to be set at a level that accounts for all debt incurred to that point. This episode is the first time in the debt limit’s history that it is addressed via a temporary suspension rather than a specified numerical increase in the limit.

October 2013

The federal government undergoes a 16-day partial shutdown after Congress fails to enact either appropriations bills or a continuing resolution, the result of disagreements surrounding funding for the Affordable Care Act. The shutdown ends when President Obama signs the Continuing Appropriations Act of 2014 on October 16, just weeks away from the projected “X Date.” The act provides a temporary solution to the government funding impasse and also suspends the debt limit until February 7, 2014. Concerned about continuing political brinkmanship around the debt limit, the Treasury Department publishes a report detailing the possible consequences of a default on U.S. obligations

February 2014 

The suspension of the statutory debt limit expires, and the debt limit is reinstated at $17.2 trillion. Treasury begins implementing extraordinary measures to finance the federal government on a temporary basis. Due to the large amount of tax refunds that are sent out in February, the “X Date” is expected less than a month from when extraordinary measures are initiated. Shortly after the reinstatement, President Obama signs the Temporary Debt Limit Extension Act, which suspends the debt limit through March 15, 2015.

March 2015

The latest suspension of the statutory debt limit expires and the debt limit is reinstated at $18.1 trillion. Treasury begins implementing extraordinary measures in order to finance the federal government on a temporary basis. The “X Date” is expected in the fall of 2015.

November 2015 

Only a few weeks away from the X-Date, policymakers pass the Bipartisan Budget Act of 2015, which suspends the statutory debt limit through March 15, 2017. The act also loosens the spending caps on defense and domestic discretionary spending.

March 2017 

The debt limit suspension expires and the debt limit is reinstated at $19.8 trillion. Treasury begins to implement extraordinary measures to finance the federal government on a temporary basis. The “X Date” is expected sometime in the fall of 2017.

August 2017

Only about a month away from the projected “X Date,” Hurricane Harvey strikes the United States, increasing pressure on policymakers to avoid a protracted government shutdown or debt limit standoff.

September 2017

In the aftermath of Hurricane Harvey, policymakers negotiate a three-month budget deal to keep the government open, also including both a Harvey relief package and a debt limit suspension. The legislation is passed on September 8, suspending the debt limit until December 8, 2017.

December 2017 

The brief debt limit suspension authorized in the wake of Hurricane Harvey expires, and the debt limit is reinstated once again, this time at $20.5 trillion. Treasury begins to implement extraordinary measures to finance the federal government on a temporary basis. The “X Date” is projected for sometime in March 2018. Additionally, the “Tax Cuts and Jobs Act,” passed late in December, begins to lower government revenues and thus heightens uncertaintysurrounding the timing of the “X Date.”

February 2018

Following two brief government shutdowns in early 2018, the Bipartisan Budget Act of 2018 is signed into law shortly in advance of the projected March “X Date.” The act increases discretionary spending levels for two years and suspends the debt limit through March 1, 2019.

March 2019

On March 2, 2019, the debt limit is reinstated at $22 trillion. Once again, the Treasury begins to deploy extraordinary measures to finance government operations on a temporary basis. BPC projects that by using cash on hand and extraordinary measures the Treasury will be able to fully operate the government until October or early November 2019.

July 2019

After months of negotiations, BPC’s warning of a potential early-September “X Date” pushes Congress and the White House to agree on a budget deal before the August recess. The Bipartisan Budget Act of 2019 is signed into law on August 2, raising discretionary spending levels for two years and suspending the debt limit through the end of July 2021.

August 2021

On August 1, 2021, the debt limit is reinstated at $28.4 trillion. Treasury immediately deploys extraordinary measures to finance the federal government on a temporary basis. BPC projects that cash on hand and extraordinary measures will allow Treasury to fully fund the government’s obligations until sometime in fall 2021. However, the evolution of the COVID-19 pandemic, the unpredictable disbursement of government relief payments, and the subsequent economic recovery inject significant uncertainty into the timing of the “X Date.”

October 2021

After weeks of negotiations, Congressional leaders agree on a deal to avoid a Republican filibuster and raise the debt limit by $480 billion, which President Biden signs into law on October 14, 2021. The Treasury Department estimates that this increase will facilitate federal borrowing until December 3, 2021, potentially setting up another debt limit showdown before the end of the calendar year.

December 2021

As the X Date looms, Senate leaders negotiate on a one-time carve-out to the filibuster that allows Senate Democrats to increase the debt limit with a simple majority vote. Congress passes legislation raising the debt limit by $2.5 trillion, which President Biden signs into law on December 16, 2021. BPC projects that this increase will likely enable the federal government to meet its financial obligations through at least the second quarter of 2023.

January 2023

On January 19, 2023, Treasury hits its $31.4 trillion debt limit and deploys extraordinary measures. BPC projects that extraordinary measures and Treasury’s existing cash on hand will allow it to fully fund the government’s obligations until some point between early June and early August of 2023, with an elevated risk between June 2 and June 13, 2023.

June 2023

On June 3, 2023—following months of negotiations and a day into the start of BPC’s projected X Date range—President Biden signs the Fiscal Responsibility Act of 2023 into law. The bipartisan legislation immediately suspends the debt limit through January 1, 2025, and caps discretionary spending for at least two years

August 2023

Fitch Ratings downgrades the U.S.’s credit rating from AAA to AA+, citing political brinksmanship, a complex budgeting process, and “a steady deterioration in standards of governance,” a move reminiscent of Standard & Poor’s downgrade in 2011.