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Federal Debt and the Statutory Limit, June 2013 1 (June 2013)

handle is hein.congrec/cbo11172 and id is 1 raw text is: Federal Debt and the Statutory Limit, June 2013 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. Lawmak- ers 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. The Treasury is currently at its limit on borrowing. What Is the Current Debt Limit? The current statutory limit on total debt issued by the Treasury is just under $16.7 trillion. The No Budget, No Pay Act of 2013 (Public Law 113-3) suspended the debt ceiling from February 4, 2013, through May 18, 2013. The act also specified that the amount of borrowing that occurred during that period should be added to the previ- ous debt limit of $16.394 trillion. On May 19, the limit was reset to reflect the cumulative borrowing through May 18 and now stands at $16.699 trillion. Because the No Budget, No Pay Act provided no addi- tional borrowing authority above the amount of debt that had already been issued as of May 18, the Treasury has no room under the newly established limit to increase total borrowing. Therefore, to avoid a breach of that limit, the Treasury has begun employing its well-estab- lished toolbox of so-called extraordinary measures to allow continued borrowing for a limited time.' As it reported in May, CBO projects that those measures will be exhausted in either October or November of this year.2 1. For more information, see Jacob J. Lew, Secretary of the Treasury, Department of the Treasury, letter to the Honorable John Boehner, Speaker of the House, May 17, 2013, http:i/go.usa.gov/ b Rn L 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.3 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 tax revenues are insuffi- cient 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 govern- ment's trust funds and other federal accounts for internal transactions of the government; it is not traded in capital markets. Of the $16.699 trillion in outstanding debt sub- ject to limit, roughly $11.9 trillion is held by the public and about $4.8 trillion is held by government accounts. What Happened When the Debt Limit Was Reached in May? To stay under the debt ceiling, the Treasury has employed some of its extraordinary measures. Since May 17, 2013, it has suspended the issuance of new state and local gov- ernment securities (SLGS) and declared a debt issuance suspension period from May 20, 2013, until August 2, 2013. During that period, the Treasury has the ability to suspend the issuance of securities to the Civil Service Retirement and Disability Fund and the Postal Service 2. See Congressional Budget Office, Updated Budget Projections: Fiscal Years 2013 to 2023 (May 2013), p. 4, www.cbo.govi pubficaiti oi/441 -72. 3. For more information on federal debt, see Congressional Budget Office, Federal Debt and Interest Costs (December 2010),

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