Federal Government Debt and the Debt Limit3

The gross federal debt, which represents the federal government's total outstanding debt, consists of:
the debt held by the public and the 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. Almost all of the federal government's borrowing is subject to a statutory limit. Under current law, if the Secretary of the Treasury determines that the issuance of obligations of the United States may not be made without exceeding the debt limit, a "debt issuance suspension period" may be determined. Past Treasury Actions to Postpone Reaching the Debt Limit

Treasury has yet to face a situation in which it was unable to pay its obligations as a result of reaching the debt limit. The debt limit was permanently increased on August 2, 2011, as part of the Budget Control Act of 2011 (BCA; P.L. The BCA provided for two additional debt limit increases. On February 4, 2013, the statutory debt limit was suspended through May 18, 2013, as part of the No Budget, No Pay Act of 2013 ( P.L. 113-3 ). On October 17, 2013, the debt limit was suspended through February 7, 2014, as part of the Continuing Appropriations Act, 2014 ( P.L. 113-46 ). On February 15, 2014, the debt limit was suspended for a third time through March 15, 2015, as part of the Temporary Debt Limit Extension Act ( P.L. 113-83 ). On March 16, 2015, the debt limit was reinstated and raised to $18,113 billion, a level which accommodated borrowing incurred during the suspension period. In the event of reaching the debt limit and the enactment of prioritization legislation, certain payments would receive priority. Budget outlays and revenue collections over the fiscal year, along with the funds contained in the extraordinary measures, will affect the timing of the debate over raising the debt limit. If the extraordinary measures are exhausted, Treasury will no longer be able to issue federal debt absent further legislative action. At that time, federal spending would have to be decreased or federal revenues would have to be increased by a corresponding amount to cover what cannot be borrowed. Implications of Future Federal Debt on 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. These decisions stem 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.
The gross federal debt, which represents the federal government's total outstanding debt, consists of (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.
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 which, 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.
Since 2011, the debt limit has been increased through provisions of four pieces of legislation. The debt limit was increased on August 2, 2011, as part of the Budget Control Act of 2011 (BCA; P.L. 112-25). The BCA also provided for two additional debt limit increases, which occurred in September 2011 and January 2012. On February 4, 2013, the statutory debt limit was suspended through May 18, 2013, as part of the No Budget, No Pay Act of 2013 (P.L. 113-3). On October 17, 2013, the debt limit was suspended again through February 7, 2014, as part of the Continuing Appropriations Act, 2014 (P.L. 113-46). On February 15, 2014, the debt limit was suspended for a third time, through March 15, 2015, as part of the Temporary Debt Limit Extension Act (P.L. 113-83). Between the enactment of each of these legislative measures, Treasury used extraordinary measures to continue financing obligations. On May 19, 2013, February 8, 2014, and March 16, 2015, the debt limit was reinstated at a level which accommodated borrowing incurred during the suspension periods.
Budget outlays and revenue collections along with the funds contained in the extraordinary measures will affect the timing of when the debt limit is reached. If the debt limit is reached and Treasury is no longer able to issue federal debt, federal outlays would have to be decreased or federal revenues would have to be increased by a corresponding amount to cover the gap in what cannot be borrowed.
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 is often complicated, hindered by policy disagreements, and subject to delay.