There is no debt ceiling in place, and here’s why

Eric Pfeiffer
Yahoo News

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President Obama addresses the media during the government shutdown. (Reuters)

After 16 days of a partial government shutdown, the House and Senate finally, on Wednesday night, agreed on legislation to fund the government.

And according to almost every report, the funding legislation, which was quickly signed into law by President Barack Obama, also raised the nation’s debt ceiling.

Except, that’s not exactly true.

What actually happened was that Congress voted to effectively suspend the debt ceiling from Oct. 17, 2013, through Feb. 7, 2014. In other words, they didn't raise the debt ceilingthey eliminated it altogether until Feb 7 of next year.

As it turns out, this is the second time this year that Congress has essentially turned over the keys on debt spending. And there’s every reason to believe it will do so again when both sides pick up this fight in a few months.

Allowing the White House to raise the debt ceiling without congressional approval is a move reportedly favored by Obama, but conservative critics say it will lead to disastrous and unchecked increases in spending.

In 1917, Congress created the debt ceiling, technically known as the Second Liberty Bond Act.

Before the first debt ceiling was created, Congress has to approve each individual bond and increase in national debt. Passage of the first debt ceiling began the slow march of handing over power to the executive branch, allowing the president to issue bonds without congressional approval. The only requirement is that the total amount of bonds issued stay within the debt ceiling amount mandated by Congress.

But during the 2012 debt ceiling debate, Congress took this handover of power one step further by giving President Obama a set period of time to increase the debt ceiling at his discretion. The No Budget, No Pay Act of 2013 suspended the debt ceiling from Feb. 4, 2013, to May, 19, 2013. After that, the actual debt ceiling was raised, but only enough to allow the government to safely pay its debts through October 17.

As the Daily Caller explains, now most Americans effectively have no idea how much debt the government will accrue between now and the February deadline. And without a debt ceiling, Congress and the White House could conceivably raise the debt without limit.

The Washington Post explains that suspending the debt ceiling actually stems from an idea floated by Mitch McConnell back in 2011. Under McConnell’s proposal, the president would have the sole authority to raise the debt ceiling. Congress would then vote to approve or disapprove of the change. If it voted to disapprove, the president could then veto the disapproval. And as with any presidential veto, Congress would then have to pass a two-thirds majority vote to overturn the veto and effectively block raising the debt ceiling.

Regardless of which path Congress and the White House take, they’re likely to be wrestling with massive debt for a long time to come.

Technically, the U.S. has carried a national debt every year going back to 1835. The dollar amount continues to grow each year, even as it has become a smaller percentage of the overall federal budget in recent years. The federal debt reached its peak as a percentage of the U.S. budget during World War II.

That fact has led several respected economists, including former Federal Reserve Chairman Alan Greenspan, to question why we even have a debt ceiling.

"Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and one reasonably adept at arithmetic can calculate what the debt change is going to be,” Greenspan said during an April, 2011, appearance on NBC’s “Meet the Press.”

“The Congress and the president have signed legislation predetermining what that number is,” Greenspan continued. “Why we need suspenders and belts is something I've never understood.”

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