A Manufactured Crisis
In 1917 the United States Congress first established a limit on government borrowing to finance the country’s involvement in World War I. The current debt ceiling is set at $31.4 trillion and has been raised to accommodate the government’s growing debt obligations over time. In fact, it has been raised 78 times since 1960 as a part of regular business for Congress. Historically this budgeting statute has been more procedural than material. However, recent rising debt-to-GDP levels and partisan politics have turned procedure into brinksmanship. Sadly, the 2023 debt debate is not the first of its kind.
In 2011 a prolonged debate in Congress over raising the debt ceiling led Standard & Poor’s to downgrade the United States’ credit rating and market volatility ensued with the S&P 500 dropping nearly 17% in just 11 trading days. In 2013, another impasse over the debt ceiling led to a 16-day government shutdown. We are quickly approaching a similar scenario unless Congress comes to a resolution.
