In 1917, Congress first created what is commonly known today as "the debt limit." The Second Liberty Bond Act authorized the secretary of the Treasury "to borrow, from time to time, on the credit of the United States" a sum "not exceeding in the aggregate $7,538,945,460."
Today, many, many debt limit hikes later, Treasury Secretary Tim Geithner is authorized to borrow up to an amount 2,000 times that sum; $16,394,000,000,000, to be exact. But apparently, even that isn't enough. Geithner informed Congress on New Year's Eve that unless they raised the debt limit again, he would be unable to pay all of the federal government's bills.
It was not always this way. Until World War I, when President Wilson needed cash to fund U.S. intervention in Europe, Congress separately and specifically authorized each issuance of federal government debt. For example, when the United States declared war on Spain in 1898, it also passed the War Revenue Act, which directed the Treasury secretary to issue $100 million in short-term notes and $400 million in longer-term bonds.
But President Wilson did not want to go back to Congress to authorize every specific detail of every specific debt sale for his war and other domestic efforts. Hence the 1917 act granting the Treasury secretary the authority to borrow at "such sum or sums that in his judgment may be necessary."
After World War I, the federal government went back to paying its bills on time, and another debt limit hike was not needed until the Great Depression. President Roosevelt raised the debt limit many times to fund his New Deal and then World War II.
After the Second World War had ended, America again went back to paying its bills on time. It even paid for the Korean War with tax hikes instead of new debt.
But then came the Great Society. Democrats in Congress expanded Social Security benefits and created two brand-new programs: Medicare and Medicaid. Unlike all other government spending programs, these big three "entitlement" programs do not require annual votes or budgeting. They all grow on autopilot.
As a result, the number of debt limit votes in Congress has dramatically increased, with each becoming less popular than the last.
In 1979, former Rep. Dick Gephardt, D-Mo., tried to make debt limit hike votes easier by attaching them to each year's annual budget authorization process. "Did you vote for the appropriations bill? The defense bill? The highway bill?" Gephardt would ask his colleagues. "Well, then you gotta pay the bill." With the debt limit attached to the annual budget authorization, later called the "Gephardt Rule," debt limit votes sailed through Congress for years.
But this line of reasoning barely made sense when Gephardt first made the case in 1979, and it makes no sense today. In 1979, Medicare and Social Security had positive cash flows. Each system collected more in revenue than it paid out in taxes, meaning it actually helped to fund other government programs. Today, the opposite is true. Our debt isn't caused by highway bills or defense spending. It is driven by the explosive and automatic growth of our entitlement programs.
More importantly, ever since President Obama created our nation's fourth major entitlement program -- Obamacare -- Democrats in Congress have stopped budgeting entirely. Since Obamacare became law, the Democratic Senate has not produced a single budget.
Since Democrats refuse to produce a coherent plan on how the federal government should spend the American people's money, the debt limit is the only mechanism that House Republicans now have to hold them accountable. To relinquish that power by caving into Obama's demands that the debt limit must be raised without concessions would be a dereliction of duty and a failure of Congress to exercise its constitutional power of the purse.
For now, the Federal Reserve and foreigners are still willing to lend us as much money as we want almost for free. But that will not always be the case. Western Civilization has always been suspicious of debt. "Just as the rich rule the poor, so the borrower is servant to the lender," Proverbs 22:7 reads.
Our day of debt reckoning eventually will come. The only question is how big we want our exposure to be when it does.