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Federal Debt and the Statutory Limit,
March 2015
The debt limit-commonly referred to as the debt
ceiling-is the maximum amount of debt that the
Department 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
government's operations. Currently, there is no statutory
limit on the issuance of new federal debt because the
Temporary Debt Limit Extension Act (Public Law 113-
83), enacted in February 2014, suspended the debt
ceiling through March 15, 2015.
What Is the Current Situation?
The Temporary Debt Limit Extension Act specifies that
the amount of borrowing that occurs while the limit is
suspended be added to the previous debt limit of
$17.212 trillion. Therefore, on March 16, the limit will
be reset to reflect cumulative borrowing through the
period of suspension. The amount of outstanding debt
subject to limit has now risen to around $18.1 trillion.
That amount is about twice the outstanding debt subject
to limit at the end of fiscal year 2007.
If the current suspension is not extended or a higher debt
limit not specified in law before March 16, 2015, begin-
ning on that date the Treasury will have no room to bor-
row 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. The Congressional Budget Office projects
that those measures would probably be exhausted and the
Treasury would probably run out of cash in October or
November; however, the timing and magnitude of reve-
nues and outlays over the next several months could vary
noticeably from CBO's projections, so the date on which
those measures would be exhausted and the Treasury
would run out of cash could occur earlier or later. At
such time, the government would be unable to fully pay
its obligations, a development that would lead to delays
of payments for government activities, a default on the
government's debt obligations, or both.
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.
N Debt held by the public consists mainly of securities
that the Treasury issues to raise cash to fund the opera-
tions 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.
0 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 rrerement, and
civil service retirement and disability account for most
of the debt held by government accounts.
L CBO previously projected that those developments would proba-
bly occur in September or October. (See Congressional Budget
Office, The Budget and Economic Outlook: 2015 to 2025
[January 2015], www.cbo.gov/publication/49892.) The small
shift in the projection stems from refinements to CBO's estimates
of future cash flows and of the amount of borrowing that would
be possible because of the extraordinary measures.
2. For more information on federal debt, see Congressional Budget
Office, Federal Debt and Interest Costs (December 2010),
www.cbo.gov/publication/21960.](ViewImageLocal?handle=hein.congrec/cbo2127&div=1&collection=&method=preview&ext=.png&size=3)
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