From the Congressional Budget Office (CBO)

Extraordinary Measures
have become
Standard Operating Procedures

Federal Debt and the Statutory Limit, March 2015 

  The debt limit—commonly referred to as the debt ceiling—is the maximum amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the government’s operations. Currently, there is no statutory limit on the issuance of new federal debt because the Temporary Debt Limit Extension Act (Public Law 113- 83), enacted in February 2014, suspended the debt ceiling through March 15, 2015.

  What Is the Current Situation?
  The Temporary Debt Limit Extension Act specifies that the amount of borrowing that occurs while the limit is suspended be added to the previous debt limit of $17.212 trillion. Therefore, on March 16, the limit will be reset to reflect cumulative borrowing through the period of suspension. The amount of outstanding debt subject to limit has now risen to around $18.1 trillion. That amount is about twice the outstanding debt subject to limit at the end of fiscal year 2007.
  If the current suspension is not extended or a higher debt limit not specified in law before March 16, 2015, beginning on that date the Treasury will have no room to borrow under standard operating procedures. Therefore, to avoid a breach of the ceiling, the Treasury would begin employing its well-established toolbox of so-called extraordinary measures to allow continued borrowing for a limited time. The Congressional Budget Office projects that those measures would probably be exhausted and the Treasury would probably run out of cash in October or November; however, the timing and magnitude of revenues and outlays over the next several months could vary noticeably from CBO’s projections, so the date on which those measures would be exhausted and the Treasury would run out of cash could occur earlier or later(1). At such time, the government would be unable to fully pay its obligations, a development that would lead to delays of payments for government activities, a default on the government’s debt obligations, or both.

  What Makes Up the Debt Subject to Limit?
  Debt subject to the statutory limit consists of two main components: debt held by the public and debt held by government accounts(2).

    Debt held by the public consists mainly of securities that the Treasury issues to raise cash to fund the operations and pay off the maturing liabilities of the federal government that tax revenues are insufficient to cover. Such debt is held by outside investors, including the Federal Reserve System.

Debt held by government accounts is debt issued to the federal government’s trust funds and other federal accounts for internal transactions of the government; it is not traded in capital markets. Trust funds for Social Security, Medicare, military retirement, and civil service retirement and disability account for most of the debt held by government accounts.

1. CBO previously projected that those developments would probably occur in September or October. (See Congressional Budget Office, The Budget and Economic Outlook: 2015 to 2025 [January 2015], www.cbo.gov/publication/49892.) The small shift in the projection stems from refinements to CBO’s estimates of future cash flows and of the amount of borrowing that would be possible because of the extraordinary measures.

2. For more information on federal debt, see Congressional Budget Office, Federal Debt and Interest Costs (December 2010), www.cbo.gov/publication/21960.