A helpful primer for those who haven’t been following too closely:
Q. This sounds like an odd system. Do you mean that Congress can pass a budget that requires borrowing, and then argue later about whether to approve that borrowing?
A. That’s right. The system goes back to World War I, when Congress first put a limit on federal debt. The limit was part of a law that allowed the Treasury to issue Liberty Bonds to help pay for the war. The law was intended to give the Treasury greater discretion over borrowing by eliminating the need for Congress to approve each new issuance of debt. Over the years the limit has been raised repeatedly, to $14.3 trillion today from roughly $43 billion in 1940. But outside observers have noted that the failure to make increases in the debt limit part of the regular budget process can be risky.
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Copyright 2011 The National Memo