When Debt-Ceiling Politics Was Bipartisan
President Barack Obama is hardly the first president forced to play debt-ceiling politics.
The debt ceiling is a cap on the amount of total debt the U.S. government can incur to pay the country's bills. Before the 20th century, there was no ceiling on the total amount of debt. Instead, Congress set limits on the amount of debt the Treasury could borrow for discrete purposes: a war or a public-works project. Congress also set limits on the kinds of debt the Treasury could issue for any given purpose (for example, short-term borrowing versus long-term bonds).
Whenever the Treasury exceeded the statutory limit for borrowing connected to specific spending, Congress had to vote to raise the limit. As government grew and became more complicated, the bond issues multiplied, and the votes became more frequent and nettlesome. The ad-hoc approach to debt was, in many people's eyes, becoming impractical.
Reforms came in two stages. The first arose from the need for wartime financing during the Spanish-American War of 1898 and World War I. In both conflicts, Congress granted the Treasury increased autonomy in how it financed any borrowing sanctioned by Congress. But this legislation -- most notably the Second Liberty Bond Act of 1917 -- kept the older practice of individual limits on debt in place.
In the 1930s, Congress amended the Second Liberty Bond Act and introduced the modern debt ceiling. The retooled law made all federal debt subject to a ceiling on the total amount of outstanding bonds. The legislation thus put a limit on the aggregate debt, which Congress capped in 1939 at $45 billion (it is now more than $16 trillion). This shift, the Congressional Research Service has noted, "underlined Treasury bonds' role as a means of managing federal finances rather than securities tied to specific projects or wars."
Although the new overarching debt ceiling put an end to Congress's micromanagement, it also had the effect of turning the decision on raising the debt into a single up or down vote that could bring the nation's financial stability crashing down. Because votes for or against raising limits on debts were no longer coupled to a specific project or undertaking of the government, they could easily be painted as verdicts on federal spending generally.
It didn't take long for fiscal hawks to turn the debt ceiling into a political football. During World War II, Republicans unhappy with ill-spent funds resisted raising the debt ceiling as high as Franklin Roosevelt's administration requested. In 1944, Representative Harold Knutson of the House Ways and Means Committee declared that" "even if we would set the limit at $500,000,000,000 the Roosevelt administration would reach it if given a little time. It's up to us to see that the Administration is not given any more than is absolutely necessary. ... We don't want a ceiling that known spenders can shoot at."
But it was a Democrat, not a Republican, who did more than anyone else to turn the routine vote over the debt ceiling into a referendum on runaway government spending. This was Senator Harry F. Byrd of Virginia (no relation to longtime Senator Robert Byrd of West Virginia). Byrd was a kingmaker in Virginia politics, an ardent segregationist and a fiscal hawk who, the Washington Post noted in the 1960s, "has been a hair shirt for four Presidents."
Beginning in the late 1940s and 1950s, Byrd and his allies among both Democrats and Republicans fought a long-running and remarkably successful campaign to restrict increases in the total federal debt. Byrd targeted the administrations of Presidents Harry Truman and Dwight Eisenhower, repeatedly extracting token reductions in the debt ceiling, or frustrating attempts to increase it. Byrd described these efforts as part of a larger campaign to force the country onto a "pay-as-we-go basis."
His most notable victory occurred in 1953, when Eisenhower pushed Congress to raise the debt ceiling to $290 million from $275 million. Byrd quashed the vote, betting that Eisenhower would find a way to stay within the limit. He did, though as the historian Joseph Thorndike has observed, this meant liquidating some of the nation's gold reserves to retire outstanding debt.
Emboldened, Byrd fought a running battle against futures increases. "The struggle is not over," wrote one newspaper of Byrd's campaign. "Senator Byrd has determined to make it an annual affair." While he occasionally agreed to increases of the debt ceiling, Byrd typically made them temporary, forcing Congress to revisit the issue again and again. "I don't intend to give them $1 more than is necessary to get by," Byrd declared in 1955. "I am opposed to any permanent increase."
On the surface, Byrd's tactics seem a harbinger of the Tea Party's maneuvers over the debt ceiling. That analysis misses the big picture. Byrd was leading a bipartisan force, not an extremist wing of a single party. And while Byrd was more than happy to play politics with the debt ceiling, he wasn't inclined to turning votes into a doomsday machine.
When the Washington Post interviewed him in 1963, shortly before he retired, Byrd was roughing up another president over the debt ceiling. The newspaper predicted choppy waters for President John F. Kennedy, but it noted that Byrd "knows his own conscience won't let him stop some increase in the debt limit because the Government couldn't pay its bill without it." For Byrd, default was unthinkable. He never came close to allowing it.
That's a lesson the Tea Party would be wise to heed.
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Stephen Mihm at email@example.com