Federal Debt and the Statutory Limit, February 2019
CBO projects that if the debt limit is not raised or suspended again after it is automatically reset on March 2, the Treasury will probably run out of cash near the end of fiscal year 2019 or early in fiscal year 2020.
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. Currently, there is no statutory limit on the issuance of new federal debt because the bipartisan budget act of 2018 (Public Law 115-123), enacted in February 2018, suspended the limit through March 1, 2019. On March 2, 2019, the limit will be reset to reflect cumulative borrowing through the period of suspension. Unless additional legislation either extends the suspension or increases the limit, existing statutes then will allow the Treasury to declare a “debt issuance suspension period” and to take “extraordinary measures” to borrow additional funds without breaching the debt ceiling.
With a large inflow of tax revenues in April, those extraordinary measures would enable the Treasury to continue financing the government’s activities for several months. However, if the debt limit remains unchanged, the ability to borrow using those measures will ultimately be exhausted, and the Treasury will probably run out of cash near the end of this fiscal year or early in the next one, the Congressional Budget Office estimates. 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 several months could, however, differ noticeably from CBO’s projections. Therefore, the extraordinary measures could be exhausted and the Treasury could run out of cash either earlier or later than CBO projects.