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Paying Down the Federal Debt: A Discussion of Methods, February 1, 2002 1 (February 1, 2002)

handle is hein.tera/crser0108 and id is 1 raw text is: Order Code RS20302 Updated February 1, 2002 CRS Report for Congress Received through the CRS Web Paying Down the Federal Debt: A Discussion of Methods James M. Bickley Specialist in Public Finance Government and Finance Division Summary Beginning with fiscal year 1998, the federal government began running budget surpluses; that is, the flow of revenue into the U.S. Treasury exceeded the outflow of expenditures. The Treasury lowered the amount of outstanding publicly held debt by reducing new debt issuance as existing federal debt issues matured. In addition, on March 9, 2000, the Treasury conducted its first buyback operation of outstanding Treasury securities before maturity. As of January 25, 2002, the Treasury had re- purchased outstanding Treasury securities with a total par value of $63.5 billion. This report examines these two methods of paying down the publicly held debt and discusses estimates of the publicly held debt that could not be retired by the end of FY2011. Recent budget projections indicate that the U.S. government will incur deficits in fiscal years 2002 and 2003. Hence, at least in the near term, the publicly held debt will no longer be paid down but instead will increase. This report will not be updated. Beginning with fiscal year 1998, the federal government began running budget surpluses; that is, the flow of revenue into the U.S. Treasury exceeded the outflow of expenditures. Consequently, the Treasury reduced the amount of outstanding publicly held debt.1 This report examines the Treasury's methods of reducing the publicly held debt.2 In January 2001, the Congressional Budget Office (CBO) reported that the budget surplus was $236 billion in fiscal year 2000. CBO's baseline projections of the budget 1 The sum of publicly held federal debt and federal debt held in government accounts equals total federal debt. For an explanation of the relationship between budget surpluses (and deficits) and different concepts of federal debt, see CRS Report RS20767, How Budget Surpluses Change Federal Debt, by Philip D. Winters. 2 For an examination of some economic consequences of eliminating the publicly held debt, see CRS Report RL30614, What If the National Debt Were Eliminated? Some Economic Consequences, by Marc Labonte. Congressional Research Service o0o The Library of Congress

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