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1 Avi Lerner, Federal Debt and the Statutory Limit, March 2025 1 (March 26, 2025)

handle is hein.congrec/fdldbt0001 and id is 1 raw text is: he 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 or sus- pended over the years to allow for the additional borrow- ing needed to finance the government's operations. On June 3, 2023, lawmakers suspended the debt limit through January 1, 2025.1 On January 2, 2025, that limit was reinstated at $36.1 trillion-the amount of debt outstanding on the previous day. At that time, a scheduled redemption of securities held by a Medicare trust fund lowered outstanding debt by $54 billion, giving the Treasury room for additional borrowing. That redemption forestalled the beginning of a debt issuance suspension period until January 21, 2025.2 During such a period, the Treasury can pause investments in the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (PSRHBF) to free up room to borrow additional funds without breaching the debt ceiling. In addition, other well-established extraordinary measures are available to the Treasury to supplement cash balances and finance ongoing government operations. The Congressional Budget Office estimates that if the debt limit remains unchanged, the government's ability to borrow using extraordinary measures will proba- bly be exhausted in August or September 2025. The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the 1. That suspension of the debt limit was enacted in the Fiscal Responsibility Act of 2023 (Public Law 118-5). 2. Janet L. Yellen, Secretary of the Treasury, letter to the Honorable Mike Johnson, Speaker, U.S. House of Representatives (December 27, 2024), https://tinyurl.com/ycy42epu, and letter to the Honorable Mike Johnson (January 17, 2025), https://tinyurl.com/yjxr66at. intervening months could differ from CBO's projections. If the government's borrowing needs are significantly greater than CBO projects, the Treasury's resources could be exhausted in late May or sometime in June, before tax payments due in mid-June are received or before additional extraordinary measures become available on June 30. Conversely, if borrowing needs fall short of the amounts in CBO's projections, the extraordinary measures will permit the Treasury to continue financing government activities longer than expected. If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government will be unable to pay all of its obligations.3 As a result, it would have to delay making payments for some activi- ties, default on its debt obligations, or both. What Is the Current Situation? The Treasury has already reached the current debt limit of $36.1 trillion, so it has no room to borrow under its standard operating procedures other than to replace maturing debt. To avoid breaching the limit, the Treasury has begun using extraordinary measures to continue to borrow additional amounts for a limited time. Continued use of those measures, along with cash inflows of the amounts the Treasury typically receives, would, in CBO's estimation, allow the Treasury to finance the government's activities until August or September without an increase in the debt ceiling, a delay in payments, or a default. In August and September, the Treasury typically borrows more than it does in other months, in large part to finance new stu- dent loans that are originated in those two months. 3. In recent years, lawmakers have addressed the debt limit by either raising the maximum amount of debt that the Treasury may issue or suspending the debt limit for a defined period.

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