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Federal Debt and the Statutory Limit, November 2012 1 (November 2012)

handle is hein.congrec/cbo10928 and id is 1 raw text is: Federal Debt and the Statutory Limit, November 2012 The Congress has traditionally placed a limit on the total amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. Lawmakers have enacted numerous increases to the debt limit-commonly known as the debt ceiling-some of which have been temporary and many of which have been permanent. Treasury debt is now approaching the current limit. What Is the Current Debt Limit, and When Is It Likely to Be Reached? The current statutory debt limit is $16.394 trillion. As of November 27, 2012, debt subject to that limit stood at $16.279 trillion-$115 billion below the statutory ceiling. The Treasury anticipates that borrowing will reach the current limit near the end of December 2012.1 However, because the Treasury can take certain measures that it has used previously when borrowing approached or reached the debt limit, the Congressional Budget Office (CBO) expects that the department will be able to continue 1. For more information, see Department of the Treasury, Treasury Assistant Secretary for Financial Markets Matthew Rutherford November 2012 Quarterly Refunding Statement (press release, Washington, D.C., October 31, 2012), ,xwiv. treasur.govi p res s-center p res s- releases/ Pages/tg 1753. aspx. funding government activities without an increase in the debt limit until mid-February or early March. What Makes Up the Debt Subject to Limit? Debt subject to the statutory limit consists of two main components: debt held by the public and debt held by government accounts.2 Debt held by the public consists mainly of securities that the Treasury issues to raise cash to fund the operations and pay off the maturing liabilities of the federal government that revenues are insufficient to cover. Such debt is held by outside investors, including the Federal Reserve System. Debt held by government accounts is debt issued to the federal government's trust funds and other federal accounts for internal transactions of the government; it is not traded in capital markets. Of the $16.3 trillion in outstanding debt subject to limit, $11.5 trillion is held by the public and $4.8 trillion is held by government accounts. What Will Occur If the Debt Limit Is Reached? If the Congress does not raise the current debt limit, the Treasury will have to employ alternative strategies for managing its cash and borrowing in order to continue 2. For more information on federal debt, see Congressional Budget Office, T;d i-nDebt and 117-erst Cosis (December 2010).

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