Abstract
Since 1939, the US Congress has imposed a limit on aggregate federal debt and left the Treasury free to design its securities and manage its portfolio of debts. Congress has increased the aggregate debt limit whenever it threatened to bind. Before 1939, Congress arranged things differently. Congress designed each security and put limits on the amount that could be issued. We construct an implied limit on aggregate debt before 1939 by summing bond-by-bond limits at each date. Before 1939, this implied aggregate limit often declined and led to Congressional actions that produced net-of-interest surpluses that enabled it to reduce federal debt, outcomes rarely observed after 1939.
Between 1776 and 1920, the US Congress designed more than 200 distinct securities and stated the maximum amount of each that the Treasury could sell. Between 1917 and 1939, Congress gradually delegated all decisions about designing US debt instruments to the Treasury. In 1939, Congress began imposing a limit on the par value of total federal debt outstanding. By summing Congressional borrowing authorizations outstanding each year for each bond, we construct a time series of implied federal debt limits before 1939.