The year was 1953: World War II was over; the economy was thriving; Peter Pan was enchanting moviegoers; the song Vaya Con Dios was topping the charts – and the very first debt ceiling fight was brewing in Congress.
And that very first battle looked ... remarkably similar to the one happening right now, which could resolve itself in the next several days if the Senate follows the House in approving a debt deal negotiated between President Biden and House Speaker Kevin McCarthy.
The debt ceiling has been in place since 1939 (parts of it date back before that). It was originally meant to expedite business in Congress, which used to have to separately approve every bit of debt used to fund most every government project.
"That worked pretty well when the government was smaller," says Joseph Thorndike, historian and the director of the Tax History Project at Tax Analysts.
But when World War II started, the piecemeal approach no longer worked.
"The government needed to borrow lots of money very quickly, and Congress really couldn't keep up," Thorndike says.
The idea behind the debt ceiling? Agree on an overall amount and just stay under that one limit. Simple.
And that worked pretty well – until 1953.
The first fight over the debt ceiling
The debt ceiling in 1953 stood at about $275 billion (today, it currently stands at $31.4 trillion).
But with expenses from the Korean War and other bills piling up, President Dwight D. Eisenhower told Congress the debt ceiling was too low. He needed a $15 billion ceiling bump ASAP.
The request came before Congress on July 30th, 1953, the day before Congress went on break.
The House agreed immediately, but there was a hawkish group of Senators who felt like spending had gotten out of control during the New Deal and World War II and that it was time to get back to a leaner government.
They rejected Eisenhower's debt ceiling request.
"Eisenhower and the administration were basically on their own after that," says economist Kenneth Garbade. He spent years at the New York Federal Reserve Bank of New York and has studied the first debt ceiling crisis.
By the end of July, says Garbade, the U.S. had roughly $3 billion left before it hit the ceiling. That was less than the country spent in a typical month.
"So the government began to take some measures," says Garbade.
The first extraordinary measures
The first thing Eisenhower did: Order all government agencies go on a budgetary crash diet.
"It is absolutely essential that you begin immediately to take every possible step progressively to reduce the expenditures of your department during the fiscal year 1954," Eisenhower wrote to the heads of government agencies.
Bills got paid more slowly, government agencies cut way back.
It wasn't too different from the "extraordinary measures" Treasury Secretary Janet Yellen announced in January, when she warned Congress the U.S. would soon hit the debt ceiling. (These included some geeky accounting maneuvers meant to stretch the government's cash).
In spite of months of back and forth between the White House and Senate Democrats, the debt ceiling was not lifted and the bills continued to pile up.
Things were getting tight.
One New York Times headline from October 7, 1953 read: "New Loan Soon May Bring U.S. Within a Half Billion of Debt Limit."
The government was desperate. It started hunting between the couch cushions for any money it could find and eventually found some relief in government gold vaults.
"They sold about $500 million of their gold, which bought them time," says Thorndike of the Tax History Project.
The first grandstanding over the country's debt
In the meantime, the first debt ceiling grandstanding had begun.
In an Op-Ed in The New York Times, Democratic Senator Harry Byrd wrote, "I would regard it as a great mistake to increase the debt limit at this time. A debt of $275,000,000,000 is as much or more than this country should be called on to stand."
President Eisenhower shot back a few weeks later, on August 6, 1953, in a radio address to the nation.
"We have, first of all, to face the tough facts of the government debt," he began. "The last 23 years have seen this debt climb by $258 billions."
Eisenhower went on to point out that many of the spending decisions that required a debt ceiling hike had been made before he had gotten into office. Nonetheless, he insisted, the bills had to be paid.
It was an argument that sounds eerily familiar. In recent weeks, President Biden insisted that the U.S. could not default. "America is not a deadbeat nation," he said. "We pay our bills."
A debt ceiling compromise
As 1953 drew to a close, it was clear something had to give.
Spending cuts had been made, gold bars had been sold off, corners had been cut and by the summer of 1954, even the Senate hardliners agreed it was time to throw Eisenhower a bone, says historian and tax expert Thorndike.
Congress approved a $6 billion debt ceiling increase. It was less than half of the $15 billion Eisenhower had originally asked for.
"It sounds trivial," says Thorndike. "But it was enough."
And that was that. The first debt ceiling crisis was resolved.
Deja vu, all over again
Of course the debt ceiling drama had just begun. In fact, the seeds of the perennial debate had clearly been planted, even back in 1953.
Thorndike points to an OpEd from the Chicago Daily Tribune, which favored a smaller, leaner government in response to the 1953 debt ceiling battle.
"The lesson is clear: The way to get government expenditures down is to... deny the administration authority to increase the debt," the OpEd read.
Congress realized the debt ceiling debate could become a way to force a conversation about the size of government and the direction of government spending. And the White House could be forced to come to the table.
"They felt empowered by this experience," says Thorndike.
Since that article, the dozens of debt ceiling battles have all sounded pretty much the same – with one key difference, according to historian Kenneth Garbade.
"The fights have gotten much, much worse," he says.
Garbade points out that every fight seems to get nastier and to inch closer and closer to the real threat of default. And, he says, the debt ceiling is a particularly bad fight to escalate.
"I wish they'd find someplace to have an argument that, if it wasn't resolved... wasn't equivalent to detonating a hydrogen bomb in the economy."
Today, 70 years after that first debt ceiling fight, the Senate will soon decide whether to approve a debt deal that President Biden can sign into law.
If it passes, we can say Vaya Con Dios to the debt ceiling drama, at least ... for now.
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