Reaching the Debt Limit: Background and Potential Effects on Government Operations Page: 2 of 33
The following text was automatically extracted from the image on this page using optical character recognition software:
Reaching the Debt Limit: Background and Potential Effects on Government Operations
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
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 (PL. 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
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.
Congressional Research Service
Here’s what’s next.
This report can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Report.
Reaching the Debt Limit: Background and Potential Effects on Government Operations, report, March 27, 2015; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc807780/m1/2/: accessed January 18, 2019), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.