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

handle is hein.congrec/cbo11386 and id is 1 raw text is: Federal Debt and the Statutory Limit, November 2013 The debt limit-commonly referred to as the debt ceil- ing-is the maximum amount of debt that the Depart- ment of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the govern- ment's operations. The debt ceiling was suspended earlier this year-from February 4 through May 18-so that the Department of the Treasury had the authority to borrow any amounts necessary to meet the government's operat- ing needs during that period. The debt limit has again been suspended, this time through February 7, 2014. What Is the Current Situation? Currently, there is no statutory limit on the issuance of new federal debt because the Continuing Appropriations Act, 2014 (Public Law 113-46) suspended the debt ceil- ing from October 17, 2013, through February 7, 2014. The act also specified that the amount of borrowing that occurred during that period be added to the previous debt limit of $16.699 trillion. Therefore, on February 8, the limit will be reset to reflect cumulative borrowing through February 7. The amount of outstanding debt subject to limit is now around $17.1 trillion. If the current suspension is not extended or if a higher debt limit is not specified in law before February 8, 2014, beginning on that date the Treasury will have no room to borrow under standard operating procedures. Therefore, to avoid a breach of the ceiling, the Treasury would begin employing its well-established toolbox of so-called extraordinary measures to allow continued borrowing for a limited time. CBO projects that those measures would probably be exhausted in March. However, the timing and magnitude of tax refunds and receipts in February, March, and April could shift that date of exhaustion into May or June. 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.' m 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 insufficient to cover. Such debt is held by outside investors, including the Federal Reserve System. m 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. Trust funds for Social Security, Medicare, military retirement, and civil service retirement and disability account for most of the debt held by government accounts. Of the $17.1 trillion in outstanding debt subject to limit, roughly $12.2 trillion is held by the public and about $4.9 trillion is held by government accounts. What Measures Will Be Available to the Treasury in February? Without further legislation, the Treasury will have to employ its extraordinary measures to continue funding government activities after February 7, 2014. Those extraordinary measures would allow the Treasury to continue borrowing for a limited time. 1. For more information on federal debt, see Congressional Budget Office, Federal Debt and Interest Costs (December 2010),

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