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1 Federal Debt and the Statutory Limit, November 2017 1 (2017)

handle is hein.congrec/fedbslim3896 and id is 1 raw text is: sq NOVEMBER 2017 Federal Debt and the Statutory Limit, November 2017 The debt limit-commonly called the debt ceiling-is the maximum amount of debt that the Department of the Treasury can issue to the public or to other federal agencies. The amount is set by law and has been increased over the years to finance the govern- ment's operations. Currently, there is no statutory limit on the issuance of new federal debt because the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017 (Public Law 115-56), enacted in September 2017, suspended the limit through December 8, 2017. On December 9, 2017, however, the limit will be reset to reflect cumulative borrowing through the period of suspension. Unless additional legislation either extends the suspension or increases the limit, existing statutes then will allow the Treasury to declare a debt issuance suspension period and to take extraordinary measures to borrow additional funds without breaching the debt ceiling. The Congressional Budget Office projects that if the debt limit remains unchanged, the ability to borrow using extraordinary measures will be exhausted and the Treasury will most likely run out of cash by late March or early April 2018. If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on its debt obligations, or both. (The timing and size of reve- nue collections and of outlays over the next few months could differ noticeably from CBO's projections, however, so the extraordinary measures could be exhausted and the Treasury could run out of cash either earlier or later than CBO projects.) What Is the Current Situation? P.L. 115-56 specifies that the amount of borrowing that occurs during the suspension of the debt limit will be added to the previous ceiling of $19.8 trillion. As of November 17, 2017, an additional $0.7 trillion had been borrowed, bringing the amount of outstanding debt subject to limit up to $20.5 trillion. The new debt limit that will be established on December 9, 2017, will reflect additional borrowing through December 8. If the current suspension is not extended or if a higher debt limit is not legislated before December 9, from that date forward, under standard procedures, the Treasury will have no room to borrow other than to replace maturing debt. To avoid breaching the limit, the Treasury would then begin to take the extraordinary measures that allow it to continue to borrow additional amounts for a limited time. Continued use of those mea- sures, along with regular cash inflows over the next few months, should allow the Treasury to finance the govern- ment's activities for that period without an increase in the debt ceiling. What Makes Up Debt Subject to Limit? Debt subject to the statutory limit consists of debt held by the public and debt held by government accounts. Debt held by the public consists mostly of securities that the Treasury issues to raise cash to fund operations that cannot be covered by federal revenues. Such debt is held by outside investors, including the Federal Reserve System. Debt held by government accounts is issued to the federal government's trust funds and other federal accounts for internal transactions; it is not traded in cap- ital markets (see Debt Issuance: Government Account Series). Trust funds for Social Security, Medicare, 1. For more information on different measures of federal debt, see Congressional Budget Office, Federal Debt and Interest Costs (December 2010), www.cbo.gov/publication/21960. Note: Unless otherwise indicated, all years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Numbers may not sum to totals because of rounding.

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