US debt ceiling’s dates with destiny

A limit on how much the US Treasury can borrow was introduced as part of the Second Liberty Bond Act in 1917, to ensure transparency and public debate about the government deficit.

The limit has been raised many times after the financial crisis to avoid government shutdown and has become trigger for partisan infighting.

2008: The ceiling is raised both in the Housing and Economic Recovery and the Economic Stabilization Acts to $11.3tn.

2009: The limit is raised to $12.1tn with the American Recovery and Reinvestment Act and then to $12.3tn in December.

2010: In February, the limit is raised to $14.3tn. That November, Republicans win the majority in the House of Representatives, vowing to make deep spending cuts, and kicking off years of political stand-offs.

2011: In April, the government avoids a shutdown with a deal to fund the government through the fiscal year in exchange for $38.5bn in spending cuts. The $14.3tn debt limit is reached in May, and crisis is avoided by moving funds around. The International Monetary Fund warns in June that failure to lift the debt ceiling will cause a “severe shock” to the world economy. Democrat and Republicans refuse to co-operate on proposals for months, until an agreement is finally reached in August after the US loses its Standard & Poor’s top triple A rating.

2012: The debt ceiling is raised again to $16.4tn despite House rejection based on the 2011 agreement. After President Barack Obama’s re-election, intense negotiations regarding the automatic expiry of spending cuts and tax increases start. An hour after the December 31 deadline, a fiscal cliff deal is approved.

2013: In January, the House and Senate pass legislation to suspend the US borrowing limit until May 19. In February, sequestration kicks in, featuring $85bn in automatic spending cuts for 2013. Congress approves legislation to extend funding for the government until the end of September to avoid shutdown.

Forecast for the rest of the year: The debt ceiling will be reached in September or October. Congress gets back from vacation in September. The government faces a partial or complete shutdown on October 1 if there is no agreement on how to fund its operations.