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Federal Debt and the Statutory Limit, June 2017 1 (June 29, 2017)

handle is hein.congrec/cbo3572 and id is 1 raw text is: Federal Debt and the Statutory Limit, June 2017 The debt limit-commonly referred to as the debt ceiling-is the maximum amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the government's operations. The debt limit was sus- pended on November 2, 2015; on March 15, 2017, the suspension expired, and the Secretary of the Treasury announced a debt issuance suspension period. During such a period, existing statutes allow the Treasury to take a number of extraordinary measures to borrow addi- tional funds without breaching the debt ceiling. The Congressional Budget Office projects that if the debt limit remains unchanged, those measures will be exhausted and the Treasury will most likely run out of cash in early to mid-October. (However, the timing and magnitude of revenues and outlays over the next few months could vary noticeably from CBO's projections, so those measures could be exhausted and the Treasury could run out of cash earlier or later than CBO projects.) The government would then be unable to pay its obliga- tions fully, so it would have to delay making payments for its programs and activities, default on its debt obliga- tions, or both. CBO previously projected that the extraordinary mea- sures would be exhausted and the Treasury would run out of cash sometime in the fall.' The range of possible dates has narrowed as the budget outlook for this year has become clearer and CBO has increased its estimate of the Treasury's net borrowing needs. CBO currently projects that the deficit for this year will be $693 billion, which is $134 billion more than the agency estimated in 1. See Congressional Budget Office, Federal Debt and the Statutory Limit, March 2017 (March 2017), www.cbo.gov/ publication/52465. January-though some of that increase is the result of noncash transactions, which do not affect the Treasury's borrowing needs.2 What Is the Current Situation? The Bipartisan Budget Act of 2015 (Public Law 114-74) specified that the amount of borrowing that occurred during the suspension of the debt limit would be added to the previous ceiling of $18.113 trillion. Therefore, on March 16, 2017, the debt limit was reset to $19.809 tril- lion to match the amount of outstanding debt. Because the Bipartisan Budget Act did not provide any addi- tional borrowing authority, the Treasury would have had no room to borrow, other than to replace maturing debt, under its standard operating procedures. To avoid breaching the limit, the Treasury has used extraordinary measures that allow it to borrow additional amounts for a limited period. Continued use of all available mea- sures, along with regular cash inflows over the next few months, should allow the Treasury to pay its obligations fully through the end of this fiscal year and possibly early into the next without an increase in the debt ceiling. What Makes Up the Debt Subject to Limit? Debt subject to the statutory limit comprises two main components: debt held by the public and debt held by 2. For more information on CBO's most recent baseline projections, see Congressional Budget Office, An Update to the Budget and Economic Outlook: 2017 to 2027 (June 2017), www.cbo.gov/ publication/52801. About $50 billion of the upward revision to the projected deficit for 2017 results from updated estimates by federal agencies of the subsidy costs of certain federal loans and loan guarantees made in previous years; those updates do not affect the Treasury's borrowing needs. The largest of the updates is a $40 billion increase that will be recorded by the Department of Education for past student loans. Note: Unless otherwise indicated, all years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end.

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