The Debt Limit: Why It Rose After Four Years of Surpluses and the Debt Changes Since Page: 3 of 6
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CRS-3
The federal debt held by the government's own accounts grew by $853 billion over
the four years of overall surplus, FY1998 through FY2001, and continues growing; debt
held by the public fell by $448 billion over the same period, but, with the return of deficits
in FY2002 and expected in FY2003, is once again growing (see Table 1).
The Situation in 2002
The continuing increases in debt held by government accounts over the four years
of surplus (FY1998-FY2001) produced almost all of the pressure on the debt limit early
in 2002. The re-emergence of deficits in FY2002, which led to increases in debt held by
the public, added to the pressure on the debt limit later in the first six months of 2002.2
At the beginning of FY2002 (October 1, 2001), debt subject to limit was within $220
billion of the then existing $5.95 trillion debt limit.3 Between October 1, 2001, and the
end of May 2002, debt subject to limit increased by another $217 billion, divided between
a $100 billion increase in debt held by government accounts and a $117 billion increase
in debt held by the public, putting the debt subject to limit at the then existing limit.
Table 2 shows debt by month for FY2002 and FY2003 with the size of the monthly
changes.
Congress took action over May and June 2002, that eventually led to an increase in
the debt limit. The House-passed supplemental appropriations for FY2002 (H.R. 4775;
May 24, 2002) included, after extended debate, language allowing any eventual House-
Senate conference on the legislation to add an increase in the debt limit. The Senate did
not add debt-limit-increase language to its version of the supplemental appropriations bill,
S. 2551 (incorporated as an amendment to H.R. 4775, June 3, 2002). The Senate
leadership indicated a strong reluctance to include a debt limit increase in the
supplemental appropriation bill. Instead, the Senate adopted a bill, S. 2578, raising the
debt limit by $450 billion (to $6.4 trillion) without debate on June 11. At that time, a
$450 billion increase in the debt limit was thought to provide enough borrowing authority
to help fund government operations through at least the rest of calendar year 2002 and
possibly into the summer of 2003. With the warning of possible imminent default
looming over it, the House passed the $450 billion increase in the debt limit (by one vote)
on June 27. The President signed it the next day, June 28, 2002 (P.L. 107-199), ending
the 2002 debt limit crisis.
The Situation in 2003The growth in debt subject to limit since the June 2002 adoption of the last increase
in the limit (to $6.4 trillion) has again brought the debt up against the limit. On Christmas
Eve, 2002, the Treasury sent a letter to Congress requesting an increase, unspecified, in
the debt limit by late February 2003. The 108th Congress, just getting organized early in
2003, did not focus on the near-term need to raise the limit. Through the winter and into
2 Until 2001, government publications did not divide debt subject to limit into the portions held
by the public and held by government accounts. This discussion and the table use CRS
calculated amounts that approximate the amounts of debt subject to limit held in these two
categories for fiscal years prior to 2001.
' The previous increase in the debt limit was on August 5, 1997, as part of the Balanced Budget
Act of 1997 (P.L. 105-33). The limit was raised from $5.5 trillion to $5.95 trillion.
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Winters, Philip D. The Debt Limit: Why It Rose After Four Years of Surpluses and the Debt Changes Since, report, May 16, 2003; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metacrs3866/m1/3/?q=%22budgets%22: accessed May 7, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.