The Congress has traditionally placed a limit on the total amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. Lawmakers have enacted numerous increases to the debt limit—commonly known as the debt ceiling—some of which have been temporary and many of which have been permanent.
As discussed in a short CBO report—Federal Debt and the Statutory Limit, November 2012—Treasury debt is now approaching the current limit of $16.394 trillion. As of November 27, 2012, debt subject to that limit stood at $16.279 trillion—$115 billion below the statutory ceiling. About $11.5 trillion of that debt is held by the public, and the other $4.8 trillion is held by the federal government’s trust funds and certain other government accounts.
The Treasury anticipates that borrowing will reach the current limit near the end of December 2012. However, because the Treasury can take certain “extraordinary measures” that it has used previously when borrowing reached or approached the debt limit, CBO expects that the department will be able to continue funding government activities without an increase in the debt limit until mid-February or early March.
In the event that the debt limit is not increased before those measures are exhausted, the Treasury will not be authorized to issue additional debt that increased the amount outstanding. (It could only issue additional debt in amounts equal to maturing debt.) That restriction would severely strain the Treasury’s ability to manage its cash and could lead to delays of payments for government activities and possibly a default on the government’s debt obligations. Which of the government’s various financial obligations would be paid and which would not would be determined by the Administration.
Today’s report was prepared by Jared Brewster of CBO’s Budget Analysis Division.