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1 (June 21, 2002)

handle is hein.crs/crsuntaahzx0001 and id is 1 raw text is: Order Code RS21 111 Updated June 21, 2002 The Debt Limit: The Need to Raise It After Four Years of Surpluses Philip D. Winters Analyst in Government Finance Government and Finance Division Summary The statutory debt limit applies to over 99% of all federal debt, both that held by the government accounts (which are mostly federal trust funds) or by the public (any individual or entity that is not the federal government). The government's overall surplus or deficit affects only the change in debt held by the public; changes in debt held by government accounts result from surpluses or deficits credited to the accounts themselves and the government's accounting practices. Federal debt subject to limit reached the current statutory debt limit in mid-May 2002 in spite of the four previous fiscal years (1998-2001) of overall government surpluses. The surpluses reduced federal debt held by the public but had no effect on the ongoing increases in federal debt held by federal government accounts, such as the Social Security, Medicare, Transportation, and Civil Service trust funds. In the fall of 2001, the Administration indicated that the government would likely have a deficit in FY2002, increasing the chances that the debt limit would be reached substantially sooner than previously forecast. As a result, in December 2001, the Administration asked Congress to increase the current $5.95 trillion debt ceiling by $750 billion. The growth in the expected deficit for the year has been reflected in the accelerated growth in debt held by the public. The Treasury indicated (May 14) that it will run out of alternative financing options by late June, possibly leading to a government default. (This report will be updated as events warrant.) The statutory debt limit applies to almost all federal debt.1 It applies to federal debt held by the public, that is debt held outside the federal government itself, and to federal debt held by the government's own accounts, almost all of which are federal trust funds such as Social Security, Medicare, Transportation, and Civil Service. The government' s 1 When measured on a similar basis, less than one percent of total federal debt is excluded from debt limit coverage. At the end of April 2002, total federal debt was $5.952 trillion; debt subject to limit was $5.915 trillion, 99.4% of the total debt. Congressional Research Service **o The Library of Congress CRS Report for Congress Received through the CRS Web

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