Today’s post comes from Gregory Marose, an intern in the National Archives Office of Strategy and Communications.
As the calendar turns to August and the summer heat sets in, no topic is hotter than the debt ceiling.
Congress has voted to increase the debt limit more than 100 times since it was first established. How did this get started? Part of the answer is in these nearly century-old posters.
To raise money for the costs of World War I, the Federal Government began issuing war bonds. When the first round was not as successful as hoped, artists were commissioned to make more compelling posters, and famous actors encouraged citizens to buy them. Purchasing war bonds came to be seen as a patriotic duty, and several more sets were issued during the war.
With the passage of the Second Liberty Bond Act in 1917, the Department of the Treasury began issuing long-term bonds in order to minimize the government’s interest costs. As a means of managing these new obligations, the legislation enacted a statutory limit on federal debt.
Legislation passed over the next two decades created similar limits for other types of government-issued debt, including the bills and the notes issued by the Treasury.
By 1939, Congress eliminated these separate limits and established one aggregate debt limit. The nation’s cumulative debt at the time was $40.4 billion, approximately 10% below the $45 billion limit.
The federal debt did not begin to rise exponentially until the United States became involved in World War II. As a result of the large costs associated with the war effort, Congress voted to raise the debt ceiling in each year from 1941 through 1945, when it was finally set at $300 billion.
During World War II, posters were again used to encourage citizens to buy bonds.
Following the war, the debt limit did not exceed $300 billion for 17 years. But since 1962, Congress has enacted over 70 measures that have altered the nation’s borrowing limit. According to the Treasury Department and the Office of Management and Budget, these changes are the result of deficit spending caused by periods of war and economic downturns.
Who holds the debt?
No lone creditor holds the majority of the federal debt. Individuals, corporations, banks, pension funds, foreign countries, the Federal Reserve System, and government trust funds all hold government-issued debt.