CRS Issue Statement on Indexation and COLAs

Brian W. Cashell, Coordinator
Specialist in Macroeconomic Policy

Gerald Mayer
Analyst in Labor Policy

Gary Sidor
Information Research Specialist

Even though inflation, for now, is subdued, in the long run it has been persistent. To insulate some aspects of the economy from the effects of rising prices, policymakers have established certain automatic adjustments that occur on a regular schedule. Among those amounts subject to automatic adjustments are federal payments such as social security benefits. In addition, some aspects of the tax code are adjusted annually to insulate taxpayers from inflation induced increases in effective tax rates.


Date of Report: January 19, 2010
Number of Pages: 2
Order Number: IS40329
Price: $7.95

Document available electronically as a pdf file or in paper form.
To order, e-mail congress@pennyhill.com or call us at 301-253-0881.

The Debt Limit: History and Recent Increases

D. Andrew Austin
Analyst in Economic Policy

Mindy R. Levit
Analyst in Public Finance

Total debt of the federal government can increase in two ways. First, debt increases when the government sells debt to the public to finance budget deficits and acquire the financial resources needed to meet its obligations. This increases debt held by the public. Second, debt increases when the federal government issues debt to certain government accounts, such as the Social Security, Medicare, and Transportation trust funds, in exchange for their reported surpluses. This increases debt held by government accounts. The sum of debt held by the public and debt held by government accounts is the total federal debt. Surpluses generally reduce debt held by the public, while deficits raise it. 

A statutory limit has restricted total federal debt since 1917 when Congress passed the Second Liberty Bond Act. Congress has voted to raise the debt limit ten times since 2001. Deficits each year since 2001 and the persistent increases in debt held by government accounts repeatedly raised the debt to or near the limit in place at the time. Congress raised the limit in June 2002, and by December 2002 the U.S. Department of the Treasury asked Congress for another increase, which was passed in May 2003. In June 2004, the Treasury asked for another debt limit increase. After Congress recessed in mid-October 2004 without acting, the Secretary of the Treasury told Congress that the actions he was taking to avoid exceeding the debt limit would suffice only through mid-November. Congress approved a debt limit increase in a post-election session, which the President signed on November 19, 2004. 

In 2005, reconciliation instructions in the FY2006 budget resolution (H.Con.Res. 95) included a debt limit increase. With no action having been taken by December 2005, the Secretary of the Treasury sent several letters warning Congress that the Treasury would exhaust its options to avoid default by mid-March 2006. Congress passed an increase in mid-March, which the President signed on March 20. The House's adoption of the conference report on the FY2008 budget resolution in the spring of 2007 automatically created and deemed passed legislation (H.J.Res. 43) raising the debt limit by $850 billion to $9,815 billion. The Senate approved the resolution on September 27, 2007, and it was signed by the President two days later. 

The current economic slowdown led to sharply higher estimates of the FY2008 and FY2009 deficits, which led to a series of debt limit increases. A debt limit increase was included in the Housing and Economic Recovery Act of 2008 (H.R. 3221) and signed into law (P.L. 110-289) on July 30. The Emergency Economic Stabilization Act of 2008 (H.R. 1424), signed into law on October 3 (P.L. 110-343), raised the debt limit again. The debt limit was increased for the third time in less than a year with the passage of American Recovery and Reinvestment Act of 2009 on February 13, 2009 (ARRA; H.R. 1), which was signed into law on February 17, 2009 (P.L. 111- 5), which raised the debt limit to $12,104 billion. 

The House's adoption of the conference report on the FY2010 budget resolution (S.Con.Res. 13) on April 29, 2009, triggered the automatic passage of a measure (H.J.Res. 45) to raise the debt limit to $13.029 trillion. In August 2009, according to media reports, Treasury said that the debt limit would be reached in mid-October, although the Treasury later stated that the limit would not be reached until mid or late December 2009. H.R. 4314, passed by the House on December 16, 2009, and by the Senate on December 24, raised the debt limit to $12.394 trillion when the President signed the measure (P.L. 111-123) on December 28. On January 28, the Senate passed an amended version of H.J.Res. 45, which the House passed on February 4. This report, written with the assistance of Joseph McCormack, will be updated as events warrant.


Date of Report: February 4, 2010
Number of Pages: 25
Order Number: RL31967
Price: $29.95

Document available electronically as a pdf file or in paper form.
To order, e-mail congress@pennyhill.com or call us at 301-253-0881.

Trade Agreements: Impact on the U.S. Economy

James K. Jackson
Specialist in International Trade and Finance

The United States is in the process of considering a number of trade agreements. In addition, the 111th Congress may address the issue of trade promotion authority (TPA), which expired on July 1, 2007. These agreements range from bilateral trade agreements with countries that account for meager shares of U.S. trade to multilateral negotiations that could affect large numbers of U.S. workers and businesses. During this process, Congress likely will be presented with an array of data estimating the impact of trade agreements on the economy, or on a particular segment of the economy.

An important policy tool that can assist Congress in assessing the value and the impact of trade agreements is represented by sophisticated models of the economy that are capable of simulating changes in economic conditions. These models are particularly helpful in estimating the effects of trade liberalization in such sectors as agriculture and manufacturing where the barriers to trade are identifiable and subject to some quantifiable estimation. Barriers to trade in services, however, are proving to be more difficult to identify and, therefore, to quantify in an economic model. In addition, the models are highly sensitive to the assumptions that are used to establish the parameters of the model and they are hampered by a serious lack of comprehensive data in the services sector. Nevertheless, the models do provide insight into the magnitude of the economic effects that may occur across economic sectors as a result of trade liberalization. These insights are especially helpful in identifying sectors expected to experience the greatest adjustment costs and, therefore, where opposition to trade agreements is likely to occur.

This report examines the major features of economic models being used to estimate the effects of trade agreements. It assesses the strengths and weaknesses of the models as an aid in helping Congress evaluate the economic impact of trade agreements on the U.S. economy. In addition, this report identifies and assesses some of the assumptions used in the economic models and how these assumptions affect the data generated by the models. Finally, this report evaluates the implications for Congress of various options it may consider as it assesses trade agreements.


Date of Report: February 4, 2010
Number of Pages: 24
Order Number: RL31932
Price: $29.95

Document available electronically as a pdf file or in paper form.
To order, e-mail congress@pennyhill.com or call us at 301-253-0881.

U.S. Trade and Investment Relationship with Sub-Saharan Africa: The African Growth and Opportunity Act

Vivian C. Jones
Specialist in International Trade and Finance

Following the end of the apartheid era in South Africa in the early 1990s, the United States sought to increase economic relations with Sub-Saharan Africa. President Clinton instituted several measures that dealt with investment, debt relief, and trade. Congress required the President to develop a trade and development policy for Africa. 

The economic challenges facing Africa today are serious. Unlike the period from 1960 to 1973, when economic growth in Sub-Saharan Africa was relatively strong, since 1973 the countries of Sub-Saharan Africa have grown at rates well below other developing countries. There are some signs of improvement, but problems such as HIV/AIDS and the debt burden are constraining African economic growth. The global economic crisis and its aftermath have also profoundly affected the region. 

In May 2000, Congress approved a new U.S. trade and investment policy for Sub-Saharan Africa in the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-200). U.S. trade with and investment in Sub-Saharan Africa have comprised only 1%-2% of U.S. totals for the world. AGOA extends preferential treatment to imports from eligible countries that are pursuing market reform measures. Data show that U.S. imports under AGOA are mostly energy products, but imports to date of other products have grown. AGOA mandated that U.S. officials meet regularly with their counterparts in Sub-Saharan Africa, and six of these meetings have been held. 

AGOA also directed the President to provide U.S. government technical assistance and trade capacity support to AGOA beneficiary countries. Government agencies that have roles in this effort include the U.S. Agency for International Development, the Assistant U.S. Trade Representative for Africa (established by statute under AGOA), the Overseas Private Investment Corporation, the Export-Import Bank, the U.S. and Foreign Commercial Service, and the Trade and Development Agency. In addition to bilateral programs, the United States is a member of several multilateral institutions that provide trade capacity building. 

In AGOA, Congress declared that free-trade agreements should be negotiated, where feasible, with interested Sub-Saharan African countries. Related to this provision, negotiations on a freetrade agreement with the Southern African Customs Union, which includes South Africa and four other countries, began in June 2003, but were suspended in April 2006. 

Several topics may be important to the 111th Congress in the oversight of AGOA and in potential legislation amending the act. First, S. 1141 (Feinstein, introduced May 21, 2009, the TRADE Act of 2009) seeks to establish a trade preference program for least-developed countries such as Afghanistan, Bangladesh, and Yemen. Second, an emerging area of concern for Sub-Saharan African countries is growing interest in Congress over reforming trade preference programs by combining existing programs, some of which are due to expire at the end of 2010, into a unified package. H.R. 4101 (McDermott, introduced November 18, 2009) proposes such an approach. Some African leaders have expressed concern that a preference program giving trade benefits similar to those enjoyed by AGOA countries, or creating one trade preference program for all developing countries, would lead to erosion of the preferences granted to African countries under AGOA, and place them in direct competition for U.S. market share and investment with other developing and least-developed countries such as Bangladesh and Cambodia. 


Date of Report: February 4, 2010
Number of Pages: 35
Order Number: RL31772
Price: $29.95

Document available electronically as a pdf file or in paper form.
To order, e-mail congress@pennyhill.com or call us at 301-253-0881.

Social Security Benefits for Noncitizens

Dawn Nuschler
Specialist in Income Security

Alison Siskin
Specialist in Immigration Policy

Concerns about the number of unauthorized (illegal) aliens residing in the United States and the totalization agreement with Mexico have fostered considerable interest in the eligibility of noncitizens for U.S. Social Security benefits. The Social Security program provides monthly cash benefits to qualified retired and disabled workers, their dependents, and survivors. Generally, a worker must have 10 years of Social Security-covered employment to be eligible for retirement benefits (less time is required for disability and survivor benefits). Most U.S. jobs are covered under Social Security, and as a result, noncitizens who are authorized to work in the United States are eligible for a Social Security number (SSN). Noncitizens who work in Social Securitycovered employment must pay Social Security payroll taxes, including those who are in the United States working temporarily or without authorization. There are some exceptions. Generally, the work of aliens who are citizens of a country with which the United States has a "totalization agreement," coordinating the payment of Social Security taxes and benefits for workers who divide their careers between two countries, is not covered if they work in the United States for less than five years. Also, by statute, the work of aliens under certain visa categories is not covered by Social Security. 

The Social Security Protection Act of 2004 (P.L. 108-203) requires an alien whose application for benefits is based on an SSN assigned January 1, 2004, or later to have work authorization at the time an SSN is assigned, or at some later time, to gain insured status under the Social Security program. Aliens whose applications are based on SSNs assigned before January 1, 2004, may count all covered earnings toward insured status, regardless of work authorization. The Social Security Act also prohibits the payment of benefits to aliens in the United States who are not "lawfully present"; however, under certain circumstances, alien workers as well as their dependents and survivors may receive benefits while residing outside the United States (including benefits based on unauthorized work). 

In June 2004, the United States and Mexico signed a totalization agreement. In early 2007, a copy of the agreement was made publicly available. The agreement has not been transmitted to Congress for review and has not been finalized. Currently, because Mexico meets the "social insurance country" definition, a Mexican worker may receive U.S. Social Security benefits outside the United States. Family members of the Mexican worker must have lived in the United States for at least five years to receive benefits in Mexico. The agreement does not waive the requirements that aliens in the United States must be lawfully present to receive benefits in the United States, and that aliens must have work authorization at some time to gain insured status, but would allow payment of benefits to alien dependents and survivors who have never lived in the United States. The Social Security Administration reports that the projected cost of the agreement would average $105 million annually over the first five years. The Government Accountability Office reports that "the cost of [the] totalization agreement ... is highly uncertain" due to the large number of unauthorized aliens from Mexico estimated to be living in the United States. 

This report will be updated as legislative activity occurs or other events warrant.


Date of Report: February 2, 2010
Number of Pages: 29
Order Number: RL32004
Price: $29.95

Document available electronically as a pdf file or in paper form.
To order, e-mail congress@pennyhill.com or call us at 301-253-0881.