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1 Federal Debt and the Statutory Limit, September 2021 1 (September 29, 2021)

handle is hein.congrec/fldtadtsylt0001 and id is 1 raw text is: he debt limit-commonly called the debt ceiling-is the maximum amount of debt that the Department of the Treasury can issue to the public or to other federal agencies. The amount is set by law and has been increased over the years to finance the government's operations. The Bipartisan Budget Act of 2019 (Public Law 116-37) sus- pended that limit until July 31, 2021. On August 1, the debt limit was reset to $28.4 trillion; on the following day, the Treasury announced a debt issuance suspension period during which, under current law, it may take extraordinary measures to borrow additional funds without breaching the debt ceiling. The Congressional Budget Office projects that, if the debt limit remains unchanged, the Treasury's ability to borrow using extraordinary measures will be exhausted, and it will most likely run out of cash near the end of October or the beginning of November, consistent with CBO's prior estimate.1 If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for some activities, default on its debt obligations, or both. The timing and amount of revenue collections and outlays over the next few weeks are especially uncer- tain, given the magnitude of outlays related to the 2020-2021 coronavirus pandemic and for disaster relief, and could differ from CBO's projections. Therefore, the extraordinary measures could be exhausted and the Treasury could run out of cash earlier or later than CBO projects. What Is the Current Situation? P.L. 116-37 specified that the amount of borrowing that occurred during the suspension of the debt limit would be added to the previous ceiling of $22.0 trillion. On August 1, 2021, the debt limit was reset to $28.4 trillion to match the amount of outstanding debt. Because P.L. 116-37 did not provide any additional borrowing authority, the Treasury currently has no room to borrow under its standard operating procedures other than to replace maturing debt. To avoid breaching the limit, the Treasury uses the extraordinary measures that allow it to continue to borrow additional amounts for a limited time. Continued use of those measures, along with regular cash inflows, should allow the Treasury to finance the government's activities for about another month without an increase in the debt ceiling or default. What Constitutes Debt Subject to the Statutory Limit? Debt subject to the statutory limit (commonly referred to as debt subject to limit) consists of debt held by the public and debt held by government accounts.2 Debt held by the public is mostly in securities that the Treasury issues to raise cash to fund operations that can- not be covered by federal revenues. Such debt is held by outside investors, including the Federal Reserve System. Debt held by government accounts is issued to the fed- eral government's trust funds and other federal accounts for internal transactions; it is not traded in capital mar- kets. Trust funds for Social Security, Medicare, military retirement, and civil service retirement and disability hold most of that debt. 1. See Congressional Budget Office, Federal Debt and the Statutory Limit, July 2021 (July 2021), www.cbo.gov/publication/57152. 2. For more information about different measures of federal debt, see Congressional Budget Office, Federal Debt: A Primer (March 2020), www.cbo.gov/publication/56165.

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