Mindy R. Levit, Coordinator Analyst in Public Finance
Clinton T. Brass Analyst in Government Organization and Management
Thomas J. Nicola Legislative Attorney
Dawn Nuschler Specialist in Income Security
gross federal debt, which represents the federal government’s total outstanding
debt, consists of two types of debt: (1) debt held by the public and (2)
debt held in government accounts, also known as intragovernmental debt.
Federal government borrowing increases for two primary reasons: (1) budget
deficits and (2) investments of any federal government account surpluses in Treasury
securities, as required by law. Nearly all of this debt is subject to the statutory
limit. The federal debt limit currently stands at $16,394 billion.
Treasury has yet to face a situation in which it was unable to pay its
obligations as a result of reaching the debt limit. In the past, the debt
limit has always been raised before the debt reached the limit. However,
on several occasions Treasury took extraordinary actions to avoid reaching the
limit and, as a result, affected the operations of certain programs. If the
Secretary of the Treasury determines that the issuance of obligations of
the United States may not be made without exceeding the public debt limit,
Treasury can make use of “extraordinary measures.” Some of these measures
require the Treasury Secretary to authorize a debt issuance suspension period.
After a lengthy debate over the debt limit in the summer of 2011, the enactment
of the Budget Control Act of 2011 (P.L. 112-25) on August 2, 2011,
provided for an increase in the debt limit to its current level. Secretary
Geithner has stated that the current debt limit was reached on December
31, 2012, and the use of extraordinary measures will provide additional
headroom under the debt limit until February 28, 2013. After this point,
the debt limit will be reached and Treasury will no longer be able to
issue federal debt.
On January 2, 2013, President Obama signed into law the American Taxpayer
Relief Act of 2012 (ATRA; H.R. 8), which addressed many of the spending
and revenue provisions associated with the “fiscal cliff.” Prior to the
enactment of this legislation, the federal government would have had to
issue an additional $402 billion in debt above the current statutory limit to
finance all obligations for FY2013. However, because of the deficit
increase under ATRA, the amount of debt that will have to be issued above
the current statutory limit has increased by at least $329 billion, absent
further legislative action to offset this amount. Therefore, in FY2013, roughly
an additional $700 billion in debt above the current debt limit could be
required to finance the obligations of the federal government. This
provides an approximation of what would be required to cover the borrowing
need for the remainder of FY2013 once the debt limit is reached. This does
not address what would be required in FY2014 and beyond to avoid having to
raise the debt limit.
It is extremely difficult for Congress to effectively influence short-term
fiscal and budgetary policy through action on legislation adjusting the
debt limit. The need to raise (or lower) the limit during a session of
Congress is driven by previous decisions regarding revenues and spending stemming
from legislation enacted earlier in the session or in prior years.
Nevertheless, the consideration of debt limit legislation often is viewed
as an opportunity to reexamine fiscal and budgetary policy. Consequently,
House and Senate action on legislation adjusting the debt limit often is
complicated, hindered by policy disagreements, and subject to delay.
Date of Report: January 4, 2013
Number of Pages: 26 Order Number: R41633 Price: $29.95
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