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1 1 (July 23, 2021)

handle is hein.crs/goveeaz0001 and id is 1 raw text is: Congressional SResearch Service The Debt Limit in 2021 Updated July 23, 2021 Debt limit episodes-which can be defined as starting when the statutory limit on federal debt restricts some of the U.S. Treasury's normal debt operations and ending when new legislation to modify the limit is enacted-have been a recurrent federal fiscal feature in the past two decades. Since 2002, the debt limit has been modified 18 times. The Bipartisan Budget Act of 2019 (P.L. 116-37), enacted in August 2019, suspended the debt limit through July 31, 2021. Recent debt limit episodes share similarities, although the issue in 2021 has a few unique characteristics. First, the COVID-19 pandemic remains a source of economic uncertainty, and the fiscal responses it spurred have accelerated the pace of federal debt accumulation. Second, the U. S. Treasuy sharply increased its cash balances in 2020 to accommodate those fiscal responses. Third, since 2015, Bipartisan Budget Acts that adjusted statutory caps on discretionary spending imposed by the Budget Control Act of 2011 (BCA; P.L. 112-25) also suspended the debt limit. The expiration of those discretionary spending caps at the end of FY2021 rendered moot the need for legislation to modify them. Thus, the legislative vehicle used for the past few debt limit modifications is unavailable in 2021. Federal Debt and the Debt Limit When in force, the debt limit covers over 99% of federal debt. Federal debt grows when outlays exceed revenues and when the federal credit balance sheet expands. Federal debt outstanding in mid-July 2021 totaled about $28.5 trillion. Most of that debt-$22.3 trillion-is held by the public, including $5.1 trillion in Federal Reserve holdings. Another $6.2 trillion is held as intragovernmental debt, mostly in various federal trust funds such as Social Security and federal retirement programs, which hold special Treasury securities that can be redeemed later to pay program expenses. The Treasury Secretary and Extraordinary Measures On Monday, August 2, 2021, the debt limit will be reset to a level accommodating federal financial commitments since the current suspension began. Once the debt limit would restrict issuance of special securities to the Civil Service retirement trust fund, Treasuiy Secretary Janet Yellen can then invoke authorities to use extraordinary measures by declaring a debt issuance suspension period. The U. S. Treasury may then suspend investments in Civil Service and U.S. Postal Service retirement funds to help meet other federal obligations. Federal financial operations then continue normally, although debt limit Congressional Research Service https://crsreports.congress.gov IN11702 CRS INSIGHT Prepared for Membersand Committeesof Congress

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