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

handle is hein.congrec/cbo11316 and id is 1 raw text is: Federal Debt and the Statutory Limit, September 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. Law- makers have enacted numerous increases to the debt limit-commonly known as the debt ceiling-some of which have been temporary but many of which have been permanent. The Treasury's borrowing has been at the current limit since May, although it has employed a well- established toolbox of so-called extraordinary measures that allow it to borrow additional funds without breaching the debt ceiling. On September 25, 2013, the Treasury estimated that its ability to borrow under those extraordinary measures will be exhausted no later than October 17, leaving a cash balance of approximately $30 billion.' The Congressional Budget Office (CBO) currently projects that the Treasury will exhaust all of the borrowing authority created by those measures, as well as its cash balance, between October 22 and the end of the month. (It is possible, however, that the date could fall outside of that range.) Those dates are sooner than CBO estimated earlier this month, for two reasons: Forthcoming investments in Government Account Series (GAS) securities are expected to be greater than previously anticipated because a transfer of general funds to the Highway Trust Fund is scheduled to occur in October this year (rather than in November, as occurred last year) and because deposits in the Military Retirement Fund and the Medicare-Eligible Retiree Health Care Fund are now expected to be larger than they were last year; also, receipts of corporate 1. For more information, see Jacob J. Lew, Department of the Treasury, letter to the Honorable John Boehner (September 25, 2013), http://go.usi.gov/DdG4. income taxes during the past several days fell short of CBO's expectations. What Is the Current Debt Limit? The debt ceiling at the beginning of 2013 was $16.394 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 in that period should be added to the previous debt limit. As a result, on May 19, the limit was reset to reflect cumulative borrow- ing through May 18; it now stands at $16.699 trillion. Because the No Budget, No Pay Act did not provide additional borrowing authority above the amount of debt that had already been issued as of May 18, the Treasury has had no room to borrow under its standard operating procedures. To avoid breaching the limit, the Treasury has turned to the extraordinary measures that allow continued borrowing for a limited period.2 What Makes Up the Debt Subject to Limit? Debt subject to the statutory limit has two main compo- nents: debt held by the public and debt held by govern- ment accounts.3 Debt held by the public consists mainly of securities that the Treasury issues to raise cash to fund the federal government's operations and pay off maturing liabilities that tax revenues are insufficient to cover. Such 2. For more information, see Jacob J. Lew, Department of the Treasury, letter to the Honorable John Boehner (May 17, 2013), liuTp:iigo uS,,.gov/D__PE-J. 3. For more information on federal debt, see Congressional Budget Office, Federal Debt and Interest Costs (December 2010),

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