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1 Federal Debt and the Statutory Limit, February 2019 1 (February 2019)

handle is hein.congrec/cbofdstl0001 and id is 1 raw text is: ...... FEBRUARY 2019 Federal Debt and the Statutory Limit, February 2019 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 fed- eral agencies. The amount is set by law and has been increased over the years to finance the government's operations. Currently, there is no statutory limit on the issuance of new federal debt because the Bipartisan Budget Act of 2018 (Public Law 115-123), enacted in February 2018, suspended the limit through March 1, 2019. On March 2, 2019, the limit will be reset to reflect cumulative borrowing through the period of suspension. Unless additional legislation either extends the suspen- sion 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. With a large inflow of tax revenues in April, those extraordinary measures would enable the Treasury to continue financing the government's activities for several months. However, if the debt limit remains unchanged, the ability to borrow using those measures will ultimately be exhausted, and the Treasury will probably run out of cash near the end of this fiscal year or early in the next one, the Congressional Budget Office estimates. 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 revenue collections and of outlays over the next several months could, however, differ noticeably from CBO's projections. Therefore, 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? PL. 115-123 specifies that the amount of borrowing that occurs during the suspension of the debt limit will be added to the previous ceiling of $20.5 trillion. As of January 31, 2019, an additional $1.5 trillion had been borrowed, bringing the amount of outstanding debt subject to limit up to $21.9 trillion. The new debt limit, which will be established on March 2, 2019, will reflect additional borrowing through March 1. If the current suspension is not extended or if a higher debt limit is not legislated before March 2, 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. Notes: 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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