United States Debt Ceiling Crisis
The United States did not have any debt ceiling prior to 1917. Before this period, Congress either allowed Treasury to issue certain debt instruments or it authorized specific loans. There are instances when Congress authorized Treasury to use its own discretion to decide the type of debt instrument to be issued.
First, the United States instituted a debt statutory limit with the Second Liberty Bond Act of 1917 setting limits on aggregate amount of dent that could be accumulated through any individual debt categories like bills and bonds. Congress, in 1939 instituted its first limit on the overall amount of debt accumulated over all types of instruments.
Prior to the 1974 Budget and Impoundment Control Act, the debt ceiling played a very important role for the simple reason Congress did not have many opportunities to hold debates and hearings on budgets. Dick Gephardt noticing the potential problems of the debt ceiling hitting a default in 1979 imposed the ‘Gephardt Rule’.
This was a parliamentary rule that deemed when a budget gets passed then the debt ceiling can be raised. It resolves the contradiction that was associated with voting for appropriations and not voting in order to fund them. The rule was effective until in 1995 when it was repealed by Congress.
The debt ceiling in the United States has faced crisis not one or twice but three times. These are as highlighted below:
1995 Debt Ceiling Crisis
The 1995 debt ceiling crisis led to a major showdown on the federal budget. During this time, the budget did not pass and it resulted to US federal government shutdown of 1995 and 1996. Eventually, the ceiling was increased and the shutdown resolved.
2011 debt crisis
The Republicans Congress in 2011 used debt ceiling as the leverage for deficit reduction. Because of the debt ceiling debacle and credit downgrade, the Dow Jones Industrial Average resulted falling two thousand points in late July and August. After the downgrade, the DJIA has its worst days and on August 8th, it fell 635 points. The contention that resulted from this was resolved in August 2nd 2011 by the 2011Budget Control Act.
2013 debt ceiling crisis
Following increase of debt ceiling in 2011 to $ 16.394 trillion, the US reached its debt ceiling on 31st December 2012 and treasury started taking extraordinary measures. The passage of the 2012 American Taxpayer Relief Act helped resolve the fiscal cliff but there was no action taken on the debt ceiling.
Following tax cuts from ATRA, the government wanted to raise the debt ceiling to $ 700 billion in order to finance its operations for the remaining fiscal year of 2013. It was expected that by February 15, extraordinary measures would be taken.
The Treasury however said it was not set to prioritize payment and it was not clear whether it was legal to do so. The crisis started in January 2013 and came to an end on 17th October 2013 when the 2014 Continuing Appropriations Act was passed though the debate continues.
With help from writers at Essays Experts you can buy an essay paper that is well formatted and tailored to match your academic standards. We pride ourselves in being leaders in this field as such every paper we deliver is 100% unique.
We assure you our writers are masters and PhD degree holders from the best universities in the world. As such, they can handle essays on any academic or difficulty level. Leave your writing tasks with us and we guarantee you will get value for your money!