Debt Limit Extraordinary Measures

WASHINGTON, DC – The Senate Budget Committee today released its March 9, 2017, Budget Bulletin focused on the “extraordinary measures” and financial tools developed by Department of Treasury and used to pay the nation’s bills while the federal government considers raising the debt limit. The Budget Bulletin provides regular expert articles by Senate Budget Committee analysts on the issues before Congress relating to the budget, deficits, debt, and the economy.

Read the full Senate Budget Bulletin here.

Excerpts follow:

A Debt-Limit Primer

A number of factors put a check on federal government operations, including the debt limit, which statutorily caps debt held by the public and debt held by government accounts. An aggregate debt limit was first created in 1917. During the 21st century, Congress has modified the limit 15 times, most of these direct increases. Since 2013, however, Congress has been suspending the limit and prospectively increasing it to accommodate any debt outstanding.

The government’s most recent 16-month debt-limit suspension is set to expire on March 15, 2017, after which the Treasury Department can use “extraordinary measures” – financial tools developed by Treasury that allow the department to pay the bills while the government considers raising the debt ceiling. The government is moving toward another debt-limit decision this fall, when extraordinary measures are projected to be exhausted.

Use of Extraordinary Measures

Extraordinary measures delay payment of certain obligations, giving Treasury operational room under the debt limit. How much headroom Treasury needs depends on the cash flow it requires each month that would otherwise have been supplied by issuing debt. Outlays are generally paid on a regular monthly basis; however, revenue for the federal government waxes and wanes depending on when most corporate and individual income tax returns are due.

The total produced by the special accounting instruments should Treasury declare a “debt-issuance-suspension period” will likely exceed $250 billion. Thus, the current CBO forecast is for extraordinary measures to be completely exhausted this fall, depending on the expected flow of revenues and outlays.

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