Federal Debt and the Statutory Limit, January 2018

The debt limit—commonly called the debt ceiling—is the maximum amount of debt that the Department of the Treasury can issue to the public or to other federal agencies. The amount is set by law and has been increased over the years to finance the government’s operations. The limit was suspended on September 8, 2017. On December 8, 2017, that suspension expired, and the Secretary of the Treasury announced a “debt issuance suspension period” during which existing statutes allow the Treasury to take “extraordinary measures” to borrow additional funds without breaching the debt ceiling.

CBO projects that if the debt limit remains unchanged, the ability to borrow using extraordinary measures will be exhausted and the Treasury will most likely run out of cash in the first half of March 2018. If that occurred, the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on its debt obligations, or both. (The timing and size of revenue collections and of outlays over the next few weeks could differ noticeably from CBO’s projections, however, so the extraordinary measures could be exhausted and the Treasury could run out of cash either earlier or later than CBO projects.)

CBO previously projected that the extraordinary measures would be exhausted and the Treasury would run out of cash sometime in late March or early April 2018. After incorporating the anticipated effects of recent tax legislation and actual spending and revenue amounts in December into its calculations, CBO now projects the range of possible dates as falling earlier in March.

Because the tax legislation reduced individual income taxes for most taxpayers, the Internal Revenue Service released new income tax withholding tables for employers to use beginning no later than the middle of February 2018. As a result of those changes, CBO now estimates that, starting in February, withheld amounts of individual income taxes will be roughly $10 billion to $15 billion per month less than anticipated before the new law was enacted. Consequently, withheld receipts are expected to be less than the amounts paid in the comparable period last year. In addition, the government ran a deficit of $23 billion in December, and it normally runs a deficit in the second quarter of the fiscal year.