The Debt Limit Since 2011
D. Andrew Austin
Analyst in Economic Policy
March 9, 2015
Congressional Research Service
7-5700
www.crs.gov
R43389
The Debt Limit Since 2011
Summary
The Constitution grants Congress the power to borrow money on the credit of the United States—
one part of its power of the purse—and thus mandates that Congress exercise control over federal
debt. Control of debt policy has at times provided Congress with a means of raising concerns
regarding fiscal policies. Debates over federal fiscal policy have been especially animated in
recent years. The accumulation of federal debt accelerated in the wake of the 2007-2008 financial
crisis and subsequent recession. Rising debt levels, along with continued differences in views of
fiscal policy, led to a series of contentious debt limit episodes in recent years.
In 2011, federal debt had reached its legal limit on May 16, prompting then Treasury Secretary
Timothy Geithner to declare a debt issuance suspension period, allowing certain extraordinary
measures to extend Treasury’s borrowing capacity. That debt limit episode was resolved on
August 2, 2011, when President Obama signed the Budget Control Act of 2011 (BCA; S. 365;
P.L. 112-25). The BCA included provisions aimed at deficit reduction and allowing the debt limit
to rise in three stages, the latter two subject to congressional disapproval. Once the BCA was
enacted, a presidential certification triggered a $400 billion increase, raising the debt limit to
$14,694 billion, and a second $500 billion increase on September 22, 2011, as a disapproval
measure (H.J.Res. 77) only passed the House. A January 12, 2012, presidential certification
triggered a third, $1,200 billion increase on January 28, 2012, although the House passed a
disapproval measure. Federal debt again reached its limit on December 31, 2012, and
extraordinary measures were then used to allow payment of government obligations until
February 4, 2013, when H.R. 325, which suspended the debt limit until May 19, 2013, was signed
into law (P.L. 113-3). As of May 19, the debt limit was set at $16,699 billion and extraordinary
measures were again employed. On September 25, Treasury Secretary Lew notified Congress that
the government would exhaust its borrowing capacity around October 17.
On October 16, 2013, Congress passed and the President signed a continuing resolution (H.R.
2775; P.L. 113-46) that included a suspension of the debt limit that ended on February 7, 2014.
Secretary Lew declared a debt issuance suspension period on February 10, 2014, scheduled to last
until February 27, 2014. After that date, according to Lew, the U.S. Treasury could have
exhausted its borrowing capacity. On February 11, 2014, the House voted to suspend the debt
limit (S. 540; P.L. 113-83) through March 15, 2015. The Senate approved the measure the
following day and the President signed it on February 15, 2014.
The current debt limit suspension extends through Sunday, March 15, 2015. The next day, the
Treasury Secretary can employ extraordinary measures to meet federal obligations. Independent
forecasters expect that the U.S. Treasury will be able to pay federal obligations until October or
even November 2015. Those forecasts, however, are subject to significant uncertainties.
Total federal debt can increase in two ways. First, through debt increases when the government
sells debt to the public to finance budget deficits and acquire the financial resources needed to
meet its obligations. This increases debt held by the public. Second, debt increases when the
federal government issues debt to certain government accounts, such as the Social Security,
Medicare, and Transportation trust funds, in exchange for their reported surpluses. This increases
debt held by government accounts. The sum of debt held by the public and debt held by
government accounts is the total federal debt. Surpluses reduce debt held by the public, while
deficits raise it. This report will be updated as events warrant.
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Contents
Federal Debt Policy and the Debt Limit .......................................................................................... 1
Extraordinary Measures and Debt Issuance Suspension Periods .............................................. 2
Recent Increases in the Debt Limit ............................................................................................ 3
The 2011 Debt Limit Episode .......................................................................................................... 5
The 2011 Debt Ceiling Episode Begins ..................................................................................... 6
Proposed Solutions in the Spring of 2011 ........................................................................... 6
The Budget Control Act of 2011 ............................................................................................... 7
Debt Limit Increases Under the BCA ................................................................................. 8
The Debt Limit in 2013 ................................................................................................................... 9
Debt Limit Reached at End of December 2012 ......................................................................... 9
Suspension of the Debt Limit Until May 19, 2013 .................................................................... 9
Replenishing the U.S. Treasury’s Extraordinary Measures ............................................... 10
Debt Limit Reset and Return of Extraordinary Measures in May 2013 ............................ 11
Debt Limit Forecasts in 2013 .................................................................................................. 11
Debt Limit Issues in 2013 ................................................................................................. 16
Resolution of the Debt Limit Issue in October 2013 ............................................................... 18
Other Proposals Regarding the Debt Limit in October 2013 .................................................. 19
The Debt Limit in Early 2014 ........................................................................................................ 19
Debt Limit Forecasts in Late 2013 and 2014 .......................................................................... 19
Treasury Secretary Lew Notifies Congress in Early 2014 ...................................................... 20
Debt Limit Suspension Lapses in February 2014 .................................................................... 20
Debt Limit Again Suspended Until March 2015 ..................................................................... 20
Prospects for the Debt Limit in 2015 ....................................................................................... 21
Treasury Actions in 2015 ......................................................................................................... 22
Figures
Figure 1. Projection of Debt Subject to Limit and Potential Debt Limits in 2013 ........................ 13
Figure 2. Yields on Selected Treasury Bills that Mature After Projected Date of
Exhaustion of Borrowing Capacity ............................................................................................ 16
Figure 3. Projection of U.S. Treasury Headroom Under Debt Limit ............................................. 22
Tables
Table 1. Increases in the Debt Limit 1993-2014 .............................................................................. 4
Contacts
Author Contact Information........................................................................................................... 22
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Federal Debt Policy and the Debt Limit
The Constitution grants Congress the power to borrow money on the credit of the United States—
one part of its power of the purse—and thus mandates that Congress exercise control over federal
debt. Control of debt policy has at times provided Congress with a means of expressing views on
appropriate fiscal policies.
Before 1917 Congress typically controlled individual issues of debt. In September 1917, while
raising funds for the United States’ entry into World War I, Congress also imposed an aggregate
limit on federal debt in addition to individual issuance limits. Over time, Congress granted
Treasury Secretaries more leeway in debt management. In 1939, Congress agreed to impose an
aggregate limit that gave the U.S. Treasury authority to manage the structure of federal debt.1
The statutory debt limit applies to almost all federal debt.2 The limit applies to federal debt held
by the public (that is, debt held outside the federal government itself) and to federal debt held by
the government’s own accounts. Federal trust funds, such as Social Security, Medicare,
Transportation, and Civil Service Retirement accounts, hold most of this internally held debt.3 For
most federal trust funds, net inflows by law must be invested in special federal government
securities.4 When holdings of those trust funds increase, federal debt subject to limit will
therefore increase as well. The government’s on-budget fiscal balance, which excludes the net
surplus or deficit of the U.S. Postal Service and the Social Security program, does not directly
affect debt held in government accounts.5
The change in debt held by the public is mostly determined by the government’s surpluses or
deficits.6 The net expansion of the federal government’s balance sheet through loan programs also
increases the government’s borrowing requirements. Under federal budgetary rules, however,
only the net subsidy cost of those loans is included in the calculation of deficits.7
1 For details, see CRS Report RL31967, The Debt Limit: History and Recent Increases, by D. Andrew Austin and
Mindy R. Levit.
2 Approximately 0.5% of total debt is excluded from debt limit coverage. The Treasury defines “Total Public Debt
Subject to Limit” as “the Total Public Debt Outstanding less Unamortized Discount on Treasury Bills and Zero-
Coupon Treasury Bonds, old debt issued prior to 1917, and old currency called United States Notes, as well as Debt
held by the Federal Financing Bank and Guaranteed Debt.” For details, see http://www.treasurydirect.gov. The debt
limit is codified as 31 U.S.C. §3101.
3 Although there are hundreds of trust funds, the overwhelming majority are very small. The 12 largest trust funds hold
98.8% of the federal debt held in government accounts. See CRS Report R41815, Overview of the Federal Debt, by D.
Andrew Austin.
4 The National Railroad Retirement Investment Trust, which funds certain railroad retirement benefits, holds a mix of
federal and private assets.
5 In future years, when some trust funds are projected to pay out more than they take in, funds that the Treasury would
use to redeem those intergovernmental debts must be obtained via higher taxes or lower government spending.
6 Federal debt also increases when the U.S. government’s balance sheet expands to fund federal credit programs.
Seigniorage and other adjustments also affect the level of federal debt. For a crosswalk between the annual federal
deficit and the increase in federal debt, see OMB, FY2014 Analytical Perspectives, Table 5-2, Federal Government
Financing and Debt.
7 For details, see CRS Report R42632, Budgetary Treatment of Federal Credit (Direct Loans and Loan Guarantees):
Concepts, History, and Issues for Congress, by Mindy R. Levit.
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Extraordinary Measures and Debt Issuance Suspension Periods
Congress has authorized the Treasury Secretary to invoke a “debt issuance suspension period,”
which triggers the availability of extraordinary measures, which are special strategies to handle
cash and debt management. Actions taken in the past include suspending sales of nonmarketable
debt, postponing or downsizing marketable debt auctions, and withholding receipts that would be
transferred to certain government trust funds. In particular, extraordinary strategies include
suspending investments in Civil Service Retirement and Disability Fund (CSRDF) and the G-
Fund of the Federal Employees’ Retirement System (FERS), as well as redeeming a limited
amount of CSRDF securities.8 The Treasury Secretary is also mandated to make those funds
whole after the resolution of a debt limit episode.9
The amount of time that extraordinary measures allow the U.S. Treasury to extend its borrowing
capacity depends on the pace of deficit spending, the timing of cash receipts and outlays, and
other technical factors. Treasury cash flow projections are subject to significant uncertainties,
which further complicate attempts to estimate how long extraordinary measures would enable the
federal government to meet its financial obligations. Cash flow projections require analyses of
federal spending patterns, the pace of federal debt redemptions and refinancings, and the inflow
of receipts, each of which is subject to uncertainties. Estimates calculated by others of when
Treasury would reach the debt limit and how long extraordinary measures would extend federal
borrowing capacity have typically been close to Treasury’s estimates.10 The U.S. Treasury
Inspector General reported in 2012 that “the margin of error in these estimates at a 98 percent
confidence level is plus or minus $18 billion for one week into the future and plus or minus $30
billion for two weeks into the future.”11
An impending debt ceiling constraint presents more than one deadline. A first deadline is the
exhaustion of borrowing capacity. The U.S. Treasury, however, could continue to meet
obligations using available cash balances. As cash balances run down, however, other
complications could emerge. Low cash balances could complicate federal debt management and
Treasury auctions.12 The Government Accountability Office (GAO) has also noted that debt limit
episodes generate severe strains for Treasury staff, especially when its room for maneuver is
8 For details, see out-of-print CRS Report 95-1109, Authority to Tap Trust Funds and Establish Payment Priorities if
the Debt Limit is Not Increased, by Thomas J. Nicola and Morton Rosenberg. Available upon request from the authors.
5 U.S.C. §8348(b) defines a debt issuance suspension period as “any period for which the Secretary of the Treasury
determines for purposes of this subsection that the issuance of obligations of the United States may not be made
without exceeding the public debt limit.” After a debt issuance suspension period ends, the Treasury Secretary must
report to Congress as soon as possible regarding fund balances and any extraordinary actions taken. For details, see 5
U.S.C. §8348(j,k). For a list of extraordinary measures, see U.S. Government Accountability Office, Analysis of 2011-
2012 Actions Taken and Effect of Delayed Increase on Borrowing Costs, GAO-12-701, July 2012, Table 1, p. 8;
available at http://www.gao.gov/assets/600/592832.pdf.
9 5 U.S.C. §8348(j)(3).
10 Wrightson ICAP, The Money Market Observer, May 2, 2011; Secretary of the U.S. Treasury Timothy Geithner,
letter to Majority Leader Harry Reid, dated January 6, 2011, available at http://www.treasury.gov/connect/blog/
Documents/Letter.pdf.
11 Department of the Treasury, Office of the Inspector General, “Response to Senator Hatch Regarding Debt Limit in
2011,” OIG-CA-12-006, August 24, 2013, enclosure 1, p. 2; available at http://www.treasury.gov/about/organizational-
structure/ig/Audit%20Reports%20and%20Testimonies/
Debt%20Limit%20Response%20%28Final%20with%20Signature%29.pdf.
12 Wrightson ICAP, “Summer Break Issue,” Money Market Observer, September 2, 2013.
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severely restricted.13 Finally, if the U.S. Treasury were to run out of cash, the Treasury Secretary
would face difficult choices in how to comply simultaneously with the debt limit and the mandate
to pay federal obligations in a timely fashion.
Severe financial dislocation could result if the U.S. Treasury were unable to make timely
payments.14 For example, repo lending arrangements, which rely heavily on Treasury securities
for collateral, could become more expensive or could be disrupted.15 “Repo” is short for
repurchase agreement, which provides a common means of secured lending among financial
institutions. Repo lending rates rose sharply in early August 2011 during the 2011 debt limit
episode, but fell to previous levels once that episode was resolved.16
The Federal Reserve Open Market Committee indicated in an October 16, 2013, discussion, that
“in the event of delayed payments on Treasury securities” that discount window and other
operations would proceed “under the usual terms.”17 That statement has been taken to imply that
the Federal Reserve would be “prepared to backstop the Treasury market in the event of a
political deadlock.”18 In addition, the Federal Reserve Bank of New York issued a description of
contingency plans in December 2013 in the event of Treasury payment delays, but warned that
such measures “only modestly reduce, not eliminate, the operational difficulties posed by a
delayed payment on Treasury debt. Indeed, even with these limited contingency practices, a
temporary delayed payment on Treasury debt could cause significant damage to, and undermine
confidence in, the markets for Treasury securities and other assets.”19
Recent Increases in the Debt Limit
Table 1 presents debt limit changes over the past two decades. The debt limit was modified six
times from 1993 through 1997. Two of those modifications were enacted to prevent the debt limit
restriction from delaying payment of Social Security benefits in March 1996 before a broader
increase in the debt was passed at the end of that month.20 After 1997, debt limit increases were
unnecessary due to the appearance of federal surpluses that ran from FY1998 through FY2001.
Since FY2002 the federal government has run persistent deficits, which have been ascribed to
major tax cuts enacted in 2001 and 2003 and higher spending.21 Those deficits required a series of
increases in the debt limit.
13 U.S. Government Accountability Office, Analysis of 2011-2012 Actions Taken and Effect of Delayed Increase on
Borrowing Costs, GAO-12-701, July 2012, available at http://www.gao.gov/assets/600/592832.pdf.
14 For details, see testimony from the Senate Banking Committee hearings of October 10, 2013 noted in the following
section.
15 For background, see Tobias Adrian et al., “Repo and Securities Lending,” Federal Reserve of New York Staff Report
No. 529, revised version February 2013, available at http://www.newyorkfed.org/research/staff_reports/sr529.pdf.
16 RBC Capital Markets, U.S. Economics and Rates Focus, September 25, 2013.
17 Federal Reserve, “FOMC Minutes for October 29-30, 2013 Meeting,” videoconference meeting of October 16, p. 11;
available at http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20131030.pdf.
18 Wrightson ICAP, “Debt Ceiling Outlook,” Money Market Observer, January 27, 2014.
19 Federal Reserve Bank of New York, Treasury Market Practices Group, Operational Plans for Various Contingencies
for Treasury Debt Payments, December 23, 2013, available at http://www.newyorkfed.org/tmpg/
Operations_Contingency_Plans.pdf.
20 For a description of the budget cycle in FY1966, see CRS Report RS20348, Federal Funding Gaps: A Brief
Overview, by Jessica Tollestrup.
21 See CBO, “Changes in CBO’s Baseline Projections Since January 2001,” June 7, 2012; http://www.cbo.gov/sites/
(continued...)
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Table 1. Increases in the Debt Limit 1993-2014
Change From
New Debt Limit
Previous Limit
Date
Public Law (P.L.) Number
($ billion)
($ billion)
April 6, 1993
P.L. 103-12
$4,370a $225
August 10, 1993
P.L. 103-66
4,900
530
February 8, 1996
P.L. 104-103
b —
March 12, 1996
P.L. 104-115
c —
March 29, 1996
P.L. 104-121
5,500
600d
August 5, 1997
P.L. 105-33
5,950
450
June 28, 2002
P.L. 107-199
6,400
450
May 27, 2003
P.L. 108-24
7,384
984
November 19, 2004
P.L. 108-415
8,184
800
March 20, 2006
P.L. 109-182
8,965
781
September 29, 2007
P.L. 110-91
9,815
850
July 30, 2008
P.L. 110-289
10,615
800
October 3, 2008
P.L. 110-343
11,315
700
February 17, 2009
P.L. 111-5
12,104
789
December 28, 2009
P.L. 111-123
12,394
290
February 12, 2010
P.L. 111-139
14,294
1,900
August 2, 2011
P.L. 112-25
16,394e 2,100e
February 4, 2013
P.L. 113-3
f 305f
October 16, 2013
P.L. 113-46
g
213g
February 12, 2014
P.L. 113-83
h h
Sources: CRS, compiled using the Legislative Information System, available at http://www.congress.gov; OMB.
a. Increased the debt limit temporarily through September 30, 1993.
b. Temporarily exempted from limit obligations in an amount equal to the monthly insurance benefits payable
under Title II of the Social Security Act in March 1996, the exemption to expire on the earlier of an
increase in the limit or March 15, 1996.
(...continued)
default/files/cbofiles/attachments/06-07-ChangesSince2001Baseline.pdf. According to CBO estimates, over the
FY2002-FY2011 period legislative changes in federal revenue policies accounted for a change of -$6.1 trillion;
legislative changes in spending policies accounted for an estimated increase of $5.6 billion over that period; and
concomitant net interest costs resulted in a change of $1.4 trillion; all relative to the FY2001 CBO current-law baseline.
Economic and technical factors accounted for about 10% of the divergence between FY2001 baseline projections and
actual budget results. The four discretionary subfunctions with the largest real increases in outlays between FY2001
and FY2011 were Defense-Military ($322 billion); Elementary, secondary, and vocational education ($34 billion);
Hospital and medical care for veterans ($25 billion); and ground transportation ($18 billion), all expressed in FY2013
dollars. The four mandatory subfunctions with the largest real increases in outlays over the same period were Medicare
($221 billion); Social Security ($196 billion); Health care services ($140 billion); and Unemployment compensation
($86 billion). See also Alan J. Auerbach and William G. Gale, “The Economic Crisis and the Fiscal Crisis: 2009 and
Beyond,” Tax Notes special report, October 5, 2009.
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c. Temporarily exempted from limit (a) obligations in an amount equal to the monthly insurance benefits
payable under Title II of the Social Security Act in March 1996 and (b) certain obligations issued to trust
funds and other Federal Government accounts, both exemptions to expire on the earlier of an increase in
the limit or March 30, 1996.
d. Difference from debt limit set on August 10, 1993.
e. See discussion in section “Debt Limit Increases Under the BCA.” BCA-related increases, divided into three
steps ($400 billion on August 2, 2011; $500 billion on September 22, 2011; and $1,200 billion on January 28,
2012) totaled $2,100 billion.
f.
Debt limit suspended until May 19, 2013. Debt limit set at $16,699 billion after suspension ended. See
discussion in text below.
g. Debt limit suspension ended February 7, 2014. Suspension required presidential certification. Debt limit set
to $17,212 billion after suspension ended. See discussion in text below.
h. Debt limit suspension ends March 15, 2015. Suspension does not require presidential certification.
The 2011 Debt Limit Episode
The 2011 debt limit episode attracted far more attention than other recent debt limit episodes. In
mid-2011 several credit ratings agencies and investment banks expressed concerns about the
consequences to the financial system and the economy if the U.S. Treasury were unable to fund
federal obligations.22 Many economists and financial institutions stated that if the market
associated Treasury securities with default risks, the effects on global capital markets could be
significant.23
Debate during the 2011 debt limit episode reflected a growing concern with the fiscal
sustainability of the federal government. While projections issued in 2011 indicated that federal
deficits would shrink over the next half decade, deficits later in the decade were expected to
rise.24 Without major changes in federal policies, the amount of federal debt would increase
substantially. CBO has repeatedly warned that the current trajectory of federal borrowing is
unsustainable and could lead to slower economic growth in the long run as debt rises as a
percentage of GDP.25 Unless federal policies change, Congress would repeatedly face demands to
raise the debt limit to accommodate the growing federal debt in order to provide the government
with the means to meet its financial obligations.
The next section provides a brief chronology of events from the 2011 debt limit episode.
22 Reuters, “S&P to Deeply Cut U.S. Ratings If Debt Payment Missed,” June 29, 2011. For a summary of statements by
the three major ratings agencies, see CRS Report R41932, Treasury Securities and the U.S. Sovereign Credit Default
Swap Market, by D. Andrew Austin and Rena S. Miller.
23 JPMorgan Chase, “The Domino Effect of a US Treasury Technical Default,” U.S. Fixed Income Strategy Group
Brief, April 19, 2011; Fitch Ratings, “Thinking the Unthinkable—What if the Debt Ceiling Was Not Increased and the
US Defaulted?” June 8, 2011.
24 Congressional Budget Office, An Analysis of the President’s Budgetary Proposals for Fiscal Year 2012, April 15,
2011; http://www.cbo.gov/publication/22087.
25 Congressional Budget Office, The 2013 Long-Term Budget Outlook, September 17, 2013; http://www.cbo.gov/
publication/44521.
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The 2011 Debt Ceiling Episode Begins
On May 16, 2011, U.S. Treasury Secretary Timothy Geithner announced that the federal debt had
reached its statutory limit and declared a debt issuance suspension period, which would allow
certain extraordinary measures to extend Treasury’s borrowing capacity until about August 2,
2011.26 Had the U.S. Treasury exhausted its borrowing authority, it could have used cash balances
to meet obligations for some period of time.
Over the course of the 2011 debt limit episode Treasury estimates of when the debt limit would
begin to bind and how long extraordinary measures would suffice to meet federal obligations
shifted. For instance, in April 2011 the U.S. Treasury had projected that its borrowing capacity,
even using extraordinary measures, would be exhausted by about July 8, 2011.27 The Treasury
Secretary, in a letter to Congress dated May 2, 2011, had indicated that he would declare a debt
issuance suspension period on May 16, unless Congress acted beforehand, which would allow
certain extraordinary measures to extend Treasury’s borrowing capacity until early August 2011.28
On July 1, 2011, the U.S. Treasury confirmed its view that its borrowing authority would be
exhausted on August 2, the date cited in Treasury Secretary Geithner’s May 16, 2011, letter that
invoked the debt issuance suspension period.29
Proposed Solutions in the Spring of 2011
A bill (H.R. 1954) to raise the debt limit to $16,700 billion was introduced on May 24 and was
defeated in a May 31, 2011, House vote of 97 to 318. The House passed the Cut, Cap, and
Balance Act of 2011 (H.R. 2560; 234-190 vote) on July 19, 2011. The measure would have
increased the statutory limit on federal debt from $14,294 billion to $16,700 billion once a
proposal for a constitutional amendment requiring a balanced federal budget was transmitted to
the states. On July 22, the Senate tabled the bill on a 51-46 vote.
Some commentators in early 2011 suggested that cutting federal spending could slow the growth
in federal debt enough to avoid an increase in the debt limit. The scale of required spending
reductions, as of the middle of FY2011, would have been large. For example, at the start of the
third quarter of FY2011 on April 1, 2011, federal debt was within $95 billion of its limit.
According to CBO baseline estimates issued at the time, the expected deficit for the remainder of
FY2011 would be about $570 billion. Reaching the end of FY2011 on September 30, 2011,
without an increase in the debt limit or the use of extraordinary measures would have thus
required a spending reduction of at least $570 billion, or about 85% of discretionary spending for
the rest of that fiscal year.30
26 Secretary of the U.S. Treasury Timothy Geithner, letter to Majority Leader Harry Reid, dated May 16, 2011,
available at http://www.treasury.gov/connect/blog/Documents/20110516Letter%20to%20Congress.pdf.
27 Secretary of the U.S. Treasury Timothy Geithner, letter to Majority Leader Harry Reid, dated April 4, 2011, available
at http://www.treasury.gov/connect/blog/Documents/FINAL%20Letter%2004-04-
2011%20Reid%20Debt%20Limit.pdf.
28 Secretary of the U.S. Treasury Timothy Geithner, letter to Speaker John Boehner, dated May 2, 2011, available at
http://www.treasury.gov/connect/blog/Documents/FINAL%20Debt%20Limit%20Letter%2005-02-
2011%20Boehner.pdf. The same text was sent to all Members.
29 U.S. Treasury, “Treasury: No Change to August 2 Estimate Regarding Exhaustion of U.S. Borrowing Authority,”
Press release tg-1225, July 1, 2011, available at http://www.treasury.gov/press-center/press-releases/Pages/tg1225.aspx.
30 According to the U.S. Treasury’s Daily Treasury Statement for April 1, debt subject to limit was $14,198.9 billion,
(continued...)
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Some have suggested that the Fourteenth Amendment (Section 4), which states that “(t)he validity
of the public debt of the United States ... shall not be questioned,” could provide the President
with authority to ignore the statutory debt limit. President Obama has rejected such claims, as
have most legal analysts.31
The Budget Control Act of 2011
On July 25, 2011, the Budget Control Act of 2011 was introduced in different forms by both
House Speaker Boehner (House Substitute Amendment to S. 627) and Majority Leader Reid
(S.Amdt. 581 to S. 1323). Subsequently, on August 2, 2011, President Obama signed into law a
substantially revised compromise measure (Budget Control Act; BCA; P.L. 112-25), following
House approval by a vote of 269-161 on August 1, 2011, and Senate approval by a vote of 74-26
on August 2, 2011.32 This measure included numerous provisions aimed at deficit reduction, and
would allow a series of increases in the debt limit of up to $2,400 billion ($2.4 trillion) subject to
certain conditions.33 These provisions eliminated the need for further increases in the debt limit
until early 2013.
In particular, the BCA included major provisions that
• imposed discretionary spending caps, enforced by automatic spending reductions,
referred to as a “sequester”;34
• established a Joint Select Committee on Deficit Reduction, whose
recommendations would be eligible for expedited consideration;
• required a vote on a joint resolution on a proposed constitutional amendment to
mandate a balanced federal budget;35 and
(...continued)
just $95.1 billion below the limit at that time of $14,294 billion; (https://fms.treas.gov/fmsweb/viewDTSFiles?dir=a&
fname=11040100.pdf). According to the CBO baseline estimates issued in March 2011 (Congressional Budget Office,
An Analysis of the President’s Budgetary Proposals for FY2012, April 15, 2011; http://www.cbo.gov/publication/
22087), the estimated deficit for FY2011 was $1,399 billion and estimated discretionary outlays were $ 1,361 billion.
According to the April 2011 CBO Monthly Budget Review (http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/
121xx/doc12126/mbr_april_2011.pdf), the deficit for the first half of FY2011 was $830 billion.
31 Adam Liptak, “The 14th Amendment, the Debt Ceiling and a Way Out,” New York Times, January 24, 2011;
Remarks by the President at University of Maryland Town Hall, available at http://www.whitehouse.gov/the-press-
office/2011/07/22/remarks-president-university-maryland-town-hall. For a legal analysis, see CRS congressional
distribution memorandum, Whether the Public Debt Clause Authorizes the President to Borrow Money in Excess of the
Debt Ceiling, December 21, 2012, by Kenneth R. Thomas.
32 Consideration of this measure began on July 25, 2011, following legislation introduced by House Speaker Boehner
(House Substitute Amendment to S. 627) and Majority Leader Reid (S.Amdt. 581 to S. 1323). Speaker Boehner’s
proposal passed the House on July 29, 2011, by a vote of 218-210. Neither proposal passed in the Senate.
33 For details, see CRS Report R41965, The Budget Control Act of 2011, by Bill Heniff Jr., Elizabeth Rybicki, and
Shannon M. Mahan.
34 Sequestration is a mechanism that directs the President to cancel budget authority or other forms of budgetary
resources in order to reach specified budget reduction targets. Balanced Budget and Emergency Deficit Control Act of
1985 (P.L. 99-177), often known as Gramm-Rudman-Hollings (GRH), introduced sequestration procedures into the
federal budget process. Those sequestration procedures were modified in subsequent years to address separation of
powers issues and other concerns. For details, see CRS Report R41901, Statutory Budget Controls in Effect Between
1985 and 2002, by Megan S. Lynch. Also see The Budget Control Act and Alternate Defense and Non-Defense
Spending Paths, FY2012-FY2021, congressional distribution memorandum, November 16, 2012, available from
authors upon request.
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• instituted a mechanism allowing for the President and Treasury Secretary to raise
the debt ceiling, subject to congressional disapproval.
Debt Limit Increases Under the BCA
The legislation provides a three-step procedure by which the debt limit can be increased. First, the
debt limit was raised by $400 billion, to $14,694 billion on August 2, 2011, following a
certification of the President that the debt was within $100 billion of its legal limit.36
A second increase of $500 billion occurred on September 22, 2011, which was also triggered by
the President’s certification of August 2. The second increase, scheduled for 50 days after that
certification, was subject to a joint resolution of disapproval. Because such a resolution could be
vetoed, blocking a debt limit increase would be challenging. The Senate rejected a disapproval
measure (S.J.Res. 25) on September 8, 2011, on a 45-52 vote. The House passed a disapproval
measure (H.J.Res. 77) on a 232-186 vote, although the Senate declined to act on that measure.
The resulting increase brought the debt limit to $15,194 billion.
In late December 2011, the debt limit came within $100 billion of its statutory limit, which
triggered a provision allowing the President to issue a certification that would lead to a third
increase of $1,200 billion.37 By design, that increase matched budget reductions slated to be made
through sequestration and related mechanisms over the FY2013-FY2021 period. That increase
was also subject to a joint resolution of disapproval. The President reportedly delayed that request
to allow Congress to consider a disapproval measure.38 On January 18, 2012, the House passed
such a measure (H.J.Res. 98) on a 239-176 vote. The Senate declined to take up a companion
measure (S.J.Res. 34) and on January 26, 2012, voted down a motion to proceed (44-52) on the
House-passed measure (H.J.Res. 98), thus clearing the way for the increase, resulting in a debt
limit of $16,394 billion.
The third increase could also have been triggered in two other ways.39 A debt limit increase of
$1,500 billion would have been permitted if the states had received a balanced budget amendment
for ratification. A measure (H.J.Res. 2) to accomplish that, however, failed to reach the
constitutionally mandated two-thirds threshold in the House in a 261–165 vote held on November
18, 2011.40 The debt limit could also have been increased by between $1,200 billion and $1,500
billion had recommendations from the Joint Select Committee on Deficit Reduction, popularly
known as the Super Committee, been reported to and passed by each chamber. If those
recommendations had been estimated to achieve an amount between $1,200 billion and $1,500
(...continued)
35 See CRS Report R41907, A Balanced Budget Constitutional Amendment: Background and Congressional Options ,
by James V. Saturno and Megan S. Lynch.
36 White House, Message from the President to the U.S. Congress, August 2, 2011, available at
http://m.whitehouse.gov/the-press-office/2011/08/02/message-president-us-congress.
37 For example, on December 30, 2011, debt subject to limit was $15,180 billion, just $14 billion below its statutory
limit. The U.S. Treasury pays interest to Social Security and certain other trust funds in the form of Treasury securities
at the end of June and December, which increases debt subject to limit.
38 CQ Roll Call Daily Briefing, January 3, 2012.
39 Congress could have considered a joint resolution of disapproval for this increase.
40 Ratification requires approval by legislatures of three-fourths of the states. Article V specifies other means of
amendment involving constitutional conventions as well.
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billion, the debt limit increase would be matched to that figure. The Joint Select Committee,
however, was unable to agree on a set of recommendations.
The Debt Limit in 2013
Debt Limit Reached at End of December 2012
On December 26, 2012, the U.S. Treasury stated that the debt would reach its limit on December
31 and that the Treasury Secretary would declare a debt issuance suspension period to authorize
extraordinary measures (noted above, described below) that could be used to meet federal
payments for approximately two months.41 As predicted, federal debt did reach its limit on
December 31, when large biannual interest payments, in the form of Treasury securities, were
made to certain trust funds.42
The U.S. Treasury stressed that these extraordinary measures would be exhausted more quickly
than in recent debt limit episodes for various technical reasons.43 A January 14, 2013, letter from
Treasury Secretary Geithner also estimated that extraordinary measures would be exhausted
sometime between mid-February or early March 2013.44 CBO had previously estimated that
federal debt would reach its limit near the end of December 2012, and that the extraordinary
measures could be used to fund government activities until mid-February or early March 2013.45
During the 112th Congress, Speaker John Boehner had stated that a future debt limit increase
should be linked to spending cuts of at least the same magnitude, a position that reflects the
structure of the Budget Control Act.46
Suspension of the Debt Limit Until May 19, 2013
House Republicans decided on January 18, 2013, to propose a three-month suspension of the debt
limit tied to a provision that would delay Members’ salaries in the event that their chamber of
Congress had not agreed to a budget resolution.47 H.R. 325, according to its sponsor, would allow
41 Treasury Secretary Timothy Geithner, letter to Senate Majority Leader Harry Reid, December 26, 2012. Identical
letters were sent to other congressional leaders. Presently and in similar past circumstances, the U.S. Treasury has held
debt subject to limit $25 million below the statutory limit. Large biannual interest payments to certain trust funds are
due on December 31.
42 The debt issuance suspension period was officially declared on December 31, 2012. See Treasury Secretary Timothy
Geithner, letter to Senate Majority Leader Harry Reid, December 31, 2012, available at http://www.treasury.gov/
initiatives/Documents/Sec%20Geithner%20Letter%20to%20Congress%2012-31-2012.pdf.
43 See Appendix to the December 26, 2012, letter to Majority Leader Reid: available at http://www.treasury.gov/
connect/blog/Documents/Appendix%20Extraordinary%20Measures%2012-26-2012.pdf.
44 Treasury Secretary Timothy Geithner, letter to House Speaker John A. Boehner, January 14, 2013, available at
http://www.treasury.gov/connect/blog/Documents/1-14-
13%20Debt%20Limit%20FINAL%20LETTER%20Boehner.pdf.
45 CBO, Federal Debt and the Statutory Limit, November 2012, available at http://www.cbo.gov/sites/default/files/
cbofiles/attachments/43736-FederalDebtLimit-11-12-12.pdf.
46 Speaker John Boehner, “Address on the Economy, Debt Limit, and American Jobs,” May 16, 2012, prepared text
available at http://www.speaker.gov/speech/full-text-speaker-boehners-address-economy-debt-limit-and-american-jobs.
47 Jonathan Weisman, “In Reversal, House G.O.P. Agrees to Lift Debt Limit,” New York Times, January 19, 2013, p.
A1; Speaker John Boehner, “Speaker Boehner: No Budget, No Pay,” speech excerpt, January 18, 2013, available at
(continued...)
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Treasury to pay bills coming due before May 18, 2013. A new debt limit would then be set on
May 19.48 The measure would also cause salaries of Members of Congress to be held in escrow
“(i)f by April 15, 2013, a House of Congress had not agreed to” a budget resolution.49 Such a
provision, however, could raise constitutional issues under the Twenty-Seventh Amendment.
On January 23, 2013, the House passed H.R. 325, which suspended the debt limit until May 19,
2013, on a 285-144 vote. The Senate passed the measure on January 31 on a 64-34 vote; it was
then signed into law (P.L. 113-3) on February 4.
Replenishing the U.S. Treasury’s Extraordinary Measures
Once H.R. 325 was signed into law on February 4, the U.S. Treasury replenished funds that had
been used to meet federal payments, thus resetting its ability to use extraordinary measures. As of
February 1, 2013, the U.S. Treasury had used about $31 billion in extraordinary measures.50
Statutory language that grants the Treasury Secretary the authority to declare a “debt issuance
suspension period” (DISP), which permits certain extraordinary measures, also requires that “the
Secretary of the Treasury shall immediately issue” amounts to replenish those funds once a debt
issuance suspension period (DISP) is over.51 A DISP extends through “any period for which the
Secretary of the Treasury determines for purposes of this subsection that the issuance of
obligations of the United States may not be made without exceeding the public debt limit.”52
Shortly after the declaration of a new debt issuance suspension period in February 2013, Jacob
Lew was confirmed as Treasury Secretary, replacing Timothy Geithner.53
(...continued)
http://www.speaker.gov/speech/speaker-boehner-no-budget-no-pay.
48 Ways & Means Chair David Camp, House debate, Congressional Record, vol. 159 (January 23, 2013), p. H237.
49 H.R. 325 (P.L. 113-3) §3.
50 In the Daily Treasury Statement for February 4, 2013 (available at http://fms.treas.gov/dts/index.html), Table III-A
shows a net change in Government Account Series of nearly $42 billion. About $31 billion of that amount reflects
replenishment of funds used for extraordinary measures, with the rest reflecting trust fund operations and other
activities. Treasury Assistant Secretary for Financial Markets Matthew Rutherford, in a February 6, 2013, quarterly
refunding press conference mentioned that the U.S. Treasury had replenished those funds (see webcast:
http://www.treasury.gov/press-center/Video-Audio-Webcasts/Pages/Webcasts.aspx).
51 The statutory text (5 U.S.C. §8348(j)(3)) governing the Civil Service Retirement and Disability Fund (CSRDF) states
that
Upon expiration of the debt issuance suspension period, the Secretary of the Treasury shall
immediately issue to the Fund obligations under chapter 31 of title 31 that ... bear such interest rates
and maturity dates as are necessary to ensure that, after such obligations are issued, the holdings of
the Fund will replicate to the maximum extent practicable the obligations that would then be held
by the Fund if the suspension of investment ... during such period had not occurred.
The statutory text (5 U.S.C. §8909(c)) governing the Postal Service Retiree Health Benefit Fund (PSRHDF) states that
investments “shall be made in the same manner” as those in the CSRDF.
52 5 U.S.C. §8348(j)(5)(B).
53 U.S. Treasury, “Jacob J. Lew Confirmed as Secretary of the Treasury,” press release tg-1864; available at
http://www.treasury.gov/press-center/press-releases/Pages/tg1864.aspx. Deputy Treasury Secretary Neal Wolin served
as Acting Treasury Secretary after Secretary Geithner left the U.S. Treasury in January 2013 until Lew was confirmed.
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Debt Limit Reset and Return of Extraordinary Measures in May 2013
Once the debt limit suspension lapsed after May 18, 2013, the U.S. Treasury reset the debt limit at
$16,699 billion, or $305 billion above the previous statutory limit. On May 20, 2013, the first
business day after the expiration of the suspension, debt subject to limit was just $25 million
below the limit.
Some Members, as noted above, stated that H.R. 325 (P.L. 113-3) was intended to prevent the
U.S. Treasury from accumulating cash balances. The U.S. Treasury’s operating cash balances at
the start of May 20, 2013 ($34 billion), were well below balances ($60 billion) at the close of
February 4, 2013, when H.R. 325 was enacted.54 Some experienced analysts had stated that the
exact method by which the debt limit would be computed according to the provisions of P.L. 113-
3 was not fully clear.55 The U.S. Treasury has not provided details of how it computed the debt
limit after the suspension lapsed.
Treasury Secretary Jacob Lew notified Congress on May 20, 2013, that he had declared a new
debt issuance suspension period (DISP), triggering authorities that allow the Treasury Secretary
to use extraordinary measures to meet federal obligations until August 2.56 On August 2, 2013,
Secretary Lew notified Congress that the DISP would be extended to October 11, 2013.57 In those
notifications, as well in other communications, Secretary Lew urged Congress to raise the debt
limit in a “timely fashion.”
Debt Limit Forecasts in 2013
How long the U.S. Treasury could have continued to pay federal obligations absent an increase in
the debt limit depended on economic conditions, which affect tax receipts and spending on some
automatic stabilizer programs, and the pace of federal spending. Stronger federal revenue
collections and a slower pace of federal outlays in 2013 reduced the FY2013 deficit compared to
previous years.58 CBO estimates for July 2013 put the total federal deficit at $606 billion in
FY2013, well below the FY2012 deficit of $1,087 billion, implying a slower overall pace of
borrowing.59 Special dividends from mortgage giants Fannie Mae and Freddie Mac also extended
the U.S. Treasury’s ability to meet federal obligations.
54 U.S. Treasury, Daily Treasury Statements for February 4, 2013, and May 20, 2013.
55 Norman Carleton, “The Debt Limit and H.R. 325: The ‘No Budget, No Pay Act of 2013,’” Washington Outside blog,
January 24, 2013, available at http://washingtonoutside.blogspot.com/2013/01/the-debt-limit-and-hr-325-no-budget-
no.html.
56 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, May 20, 2013, available at
http://www.treasury.gov/initiatives/Documents/
Debt%20Limit%20Letter%202%20Boehner%20May%2020%202013.pdf. Secretary Lew was confirmed on February
27, 2013.
57 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, August 2, 2013, available at
http://www.treasury.gov/initiatives/Documents/Debt%20Limit%2020130802%20Boehner.pdf.
58 CBO, Monthly Budget Review for July 2013, August 7, 2013, available at http://www.cbo.gov/publication/44495.
59 CBO, Updated Budget Projections: Fiscal Years 2013 to 2023, May 14, 2013, available at http://www.cbo.gov/
publication/44172.
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Fannie Mae and Freddie Mac Dividend Payments to the U.S. Treasury
In September 2008, Fannie Mae and Freddie Mac entered voluntary conservatorship. As part of
their separate conservatorship agreements, Treasury agreed to support Fannie Mae and Freddie
Mac in return for senior preferred stock that would pay dividends. Losses for Fannie Mae and
Freddie Mac while in conservatorship have totaled $123 billion, although each has been
profitable since the start of 2012. For a profitable firm, some past losses can offset future tax
liabilities and would be recognized on its balance sheet as a “deferred tax asset” under standard
accounting practices. Fannie Mae and Freddie Mac wrote down the value of their tax assets
because their return to profitability was viewed as unlikely.
The return of Fannie Mae and Freddie Mac to profitability opened the possibility for a reversal of
those writedowns.60 On May 9, 2013, Fannie Mae announced that it would reverse the writedown
of its deferred tax assets.61 The Treasury agreements, as amended, set the dividend payments to a
sweep (i.e., an automatic transfer at the end of a quarter) of Fannie Mae’s and Freddie Mac’s net
worth. Thus a reversal of that writedown of the deferred tax assets triggered a payment of about
$60 billion from Fannie Mae to the U.S. Treasury on June 28, 2013.62 The U.S. Treasury received
$66.3 billion from Fannie Mae and Freddie Mac on that date.63 Fannie Mae stated that it would
pay an additional $10.2 billion in September 2013.64 On August 7, 2013, Freddie Mac announced
that it had not yet decided to write down its deferred tax assets of $28.6 billion, but that it could
do so later.65
Private Forecasts of Treasury’s Headroom
Figure 1 shows debt projections from the investment bank Goldman Sachs issued in May 2013,
including a scenario that reflects a special payment from Fannie Mae.66 The post-suspension debt
limit ($16.70 trillion) is slightly above the Goldman Sachs central scenario prediction ($16.67
trillion) in Figure 1. With the addition of the Fannie Mae dividend and a $16.70 trillion limit,
federal borrowing capacity in that estimate was projected to be exhausted in early October.
60 Freddie Mac at the end of 2012 stated that it “will continue to evaluate our conclusion regarding the need” to reverse
its writedown of tax assets. The potential deferred tax assets for Freddie Mac are much smaller than those of Fannie
Mae. See Freddie Mac (Federal Home Loan Mortgage Corporation), 10-K SEC Filing for Year Ending December 31,
2012, filed February 28, 2013.
61 Fannie Mae, “Fannie Mae Reports Pre-Tax Income of $8.1 Billion for First Quarter 2013,” press release, May 9,
2013, available at http://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2013/q12013_release.pdf.
62 Recognition of that deferred tax asset also raises policy issues unrelated to the debt limit. For an overview of related
issues, see CRS Report R42760, Fannie Mae’s and Freddie Mac’s Financial Status: Frequently Asked Questions, by
N. Eric Weiss. Also see Wrightson ICAP, “Fannie Mae’s Deferred Tax Assets,” Money Market Observer, April 29,
2013.
63 U.S. Department of the Treasury, Daily Treasury Statement for June 28, 2013, Table II.
64 Fannie Mae, “Fannie Mae Reports Net Income of $10.1 Billion and Comprehensive Income of $10.3 Billion for
Second Quarter 2013,” press release, August 8, 2013, available at http://www.fanniemae.com/resources/file/ir/pdf/
quarterly-annual-results/2013/q22013_release.pdf.
65 Reuters, “Freddie Mac profit jumps; will pay U.S. Treasury $4.4 bln (update 3),” August 7, 2013, available at
http://www.reuters.com/article/2013/08/07/usa-freddiemac-results-idUSL1N0G80GK20130807.
66 Excerpted from Alex Phillips, “The Smaller Deficit Should Extend the Next Debt Limit Deadline Slightly,” U.S.
Daily issue brief, Goldman Sachs Global Investment Research, May 3, 2013.
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Estimates of Treasury cash flows are subject to substantial uncertainty. The U.S. Treasury
Inspector General reported in 2012 that “the margin of error in these estimates at a 98 percent
confidence level is plus or minus $18 billion for one week into the future and plus or minus $30
billion for two weeks into the future.”67
Figure 1. Projection of Debt Subject to Limit and Potential Debt Limits in 2013
Source: GS Global ECS Research, based on U.S. Treasury and other data, May 3, 2013.
Notes: Different potential debt limits (dotted lines) correspond to alternative interpretations of how the limit
would be set once the debt limit suspension ends. The potential GSE dividend could result from Fannie Mae’s
recognition of certain tax assets. See text for discussion.
Treasury Secretary Lew’s Message to Congress in 2013
In May 2013, Secretary Lew had notified Congress that he expects the U.S. Treasury will be able
to meet federal obligations until at least Labor Day.68 Some private estimates suggest that the U.S.
Treasury, with the assistance of extraordinary measures, would probably be able to meet federal
obligations until mid-October or November 2013.69 By comparison, in 2011, Treasury Secretary
Geithner invoked authority to use extraordinary measures on May 16, 2011, which helped fund
payments until the debt ceiling was raised on August 2, 2011.70
67 Department of the Treasury, Office of the Inspector General, “Response to Senator Hatch Regarding Debt Limit in
2011,” OIG-CA-12-006, August 24, 2013, enclosure 1, p. 2; available at http://www.treasury.gov/about/organizational-
structure/ig/Audit%20Reports%20and%20Testimonies/
Debt%20Limit%20Response%20%28Final%20with%20Signature%29.pdf.
68 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, May 17, 2013, available at
http://www.treasury.gov/initiatives/Documents/Debt%20Limit%205-17-13%20Boehner.pdf.
69 Wrightson ICAP, “Treasury Refunding Preview,” Money Market Observer, July 29, 2013; Alex Phillips, “The
Smaller Deficit Should Extend the Next Debt Limit Deadline Slightly,” U.S. Daily issue brief, Goldman Sachs Global
Investment Research, May 3, 2013; Citi Research, “U.S. Political Risk Autumn Budget Battles and the Next Fed Chair
Outlook,” research brief, August 5, 2013.
70 Because the debt issuance suspension period included June 30, 2013, the U.S. Treasury gained additional headroom
(continued...)
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On August 26, 2013, Treasury Secretary Lew notified congressional leaders that the government
would exhaust its ability to borrow in mid-October according to U.S. Treasury projections. At that
point, the U.S. Treasury would have only an estimated $50 billion in cash to meet federal
obligations.71 With that cash and incoming receipts, the U.S. Treasury would be able to meet
obligations for some weeks after mid-October according to independent analysts, although
projecting when cash balances would be exhausted is difficult.72
On September 25, 2013, Secretary Lew sent another letter to Congress with updated forecasts of
the U.S. Treasury’s fiscal situation.73 According to those forecasts, the U.S. Treasury would
exhaust its borrowing capacity no later than October 17. At that point, the U.S. Treasury would
have about $30 billion in cash balances on hand to meet federal obligations. At the close of
business on October 8, 2013, the U.S. Treasury had an operating cash balance of $35 billion.74
On October 3, 2013, the U.S. Treasury issued a brief outlining potential macroeconomic effects of
the prospect that the federal government would be unable to pay its obligations in a timely
fashion.75 The brief provided data on how various measures of economic confidence, asset prices,
and market volatility responded to the debt limit episode in the summer of 2011.
When Might the Debt Limit Have Been Binding?
In the absence of a debt limit increase, the cash balances on hand when the U.S. Treasury’s
borrowing capacity ran out would then dwindle. At the close of business on October 11, 2013, the
U.S. Treasury’s cash balance was $35 billion.76 Those low cash balances, however, could raise
two complications even before that point.
First, low cash balances could have complicated federal debt management and Treasury auctions
in late October or early November.77 Yields for Treasury bills maturing after the October 17 date
(...continued)
due to the maturation of certain Civil Service Disability and Retirement Fund (CSRDF) securities. For details on
CSRDF and debt limit extraordinary measures, see GAO, Debt Limit: Analysis of 2011-2012 Actions Taken and Effect
of Delayed Increase on Borrowing Costs, GAO-12-701, July 2012; materials available at http://www.gao.gov/products/
GAO-12-701.
71 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, August 26, 2013, available at
http://www.treasury.gov/initiatives/Documents/082613%20Debt%20Limit%20Letter%20to%20Congress.pdf.
72 For example, Goldman Sachs has predicted that the U.S. Treasury would run out of cash around November 1, 2013.
See Alex Phillips, “The US Fiscal Debate: Headline Risks to the Downside, Fiscal Risks to the Upside,” Goldman
Sachs U.S. Daily, September 19, 2013. Also see CBO, “Federal Debt and the Statutory Limit, September 2013,”
September 25, 2013, available at http://www.cbo.gov/publication/44608. CBO estimates that without an increase in the
debt limit, that the U.S. Treasury would exhaust its cash balances between October 22 and October 31, although that
time frame is subject to uncertainty due to variations in federal outlays and receipts.
73 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, September 25, 2013, available at
http://www.treasury.gov/Documents/Debt%20Limit%2020130925%20Boehner.pdf.
74 U.S. Department of Treasury, Daily Treasury Statement, Table I, October 8, 2013, available at
https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=13100800.pdf.
75 U.S. Department of Treasury, The Potential Macroeconomic Effect of Debt Ceiling Brinksmanship,” October 3,
2013, available at http://www.treasury.gov/initiatives/Documents/
POTENTIAL%20MACROECONOMIC%20IMPACT%20OF%20DEBT%20CEILING%20BRINKMANSHIP.pdf.
76 Daily Treasury Statement, October 11, 2013, available at https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&
fname=13101100.pdf.
77 Wrightson ICAP, “Summer Break Issue,” Money Market Observer, September 2, 2013.
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mentioned in Secretary Lew’s September 25 letter have increased relative to other yields on other
Treasury securities. This appeared to signal reluctance among some investors to hold Treasury
securities that might be affected by debt limit complications.
Second, repo lending, which relies heavily on Treasury securities for collateral, could become
more expensive or could be disrupted.78 Repo lending rates rose sharply in early August 2011
during the 2011 debt limit episode, but fell to previous levels once that episode was resolved.79
Market Reaction to the Impending Exhaustion of Treasury’s Borrowing Capacity
in October 2013
In the past, some financial markets have reacted to impending debt limit deadlines, signaling
concerns about the federal government’s ability to meet obligations in a timely manner. In early
October 2013, the U.S. Treasury issued a brief that outlined how various measures of economic
confidence, asset prices, and market volatility responded to the debt limit episode in the summer
of 2011, and the prospect that the federal government might not have been able to pay its
obligations in a timely fashion.80
Some investors expressed reluctance to hold Treasury securities that might be affected by debt
limit complications. Fidelity Investments, J.P. Morgan Investment Management Inc., and certain
other funds stated in October 2013 that they had sold holdings of Treasury securities scheduled to
mature or to have coupon payments between October 16 and November 6, 2013.81
In October 2013, yields for Treasury bills maturing in the weeks after October 17—when the U.S.
Treasury’s borrowing capacity was projected to be exhausted—rose sharply relative to yields on
Treasury securities maturing in 2014. Figure 2 shows secondary market yields on Treasury bills
set to mature after the projected date when the Treasury’s borrowing capacity would be
exhausted.82 The horizontal axis shows days before the end of the DISP, and the vertical scale
shows basis points (bps). For instance, the yield for the Treasury bill maturing October 24, 2013,
rose from close to zero to 46 bps on October 15, 2013. Those yields are about 10 times larger than
for similar bills that mature in calendar year 2014.83 A four-week Treasury bill auctioned on
October 8, 2013, sold with a yield of 35 bps. By contrast, a four-week bill sold on September 4,
78 “Repo” is short for repurchase agreement. For background, see Tobias Adrian et al., “Repo and Securities Lending,”
Federal Reserve of New York Staff Report No. 529, revised version February 2013, available at
http://www.newyorkfed.org/research/staff_reports/sr529.pdf.
79 RBC Capital Markets, U.S. Economics and Rates Focus, September 25, 2013.
80 U.S. Department of Treasury, The Potential Macroeconomic Effect of Debt Ceiling Brinksmanship,” October 3,
2013, available at http://www.treasury.gov/initiatives/Documents/
POTENTIAL%20MACROECONOMIC%20IMPACT%20OF%20DEBT%20CEILING%20BRINKMANSHIP.pdf.
81 J.P. Morgan, “J.P. Morgan Takes Action in Light of Possible U.S. Government Default, October 10, 2013, available
at http://www.jpmgloballiquidity.com/blobcontent/62/379/1323366810685_Statment_US_Web_Govt_Default_10-10-
13.pdf; Fidelity Investments, “Fidelity Investments Statement on Money Market Mutual Funds,” October 2013,
available at https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/MM-MF-Statement_Oct-
2013.pdf; Ken Sweet, “Short-term Funds Show Stress as Default Looms,” Associated Press, October 9, 2013, available
at http://money.msn.com/business-news/article.aspx?feed=AP&date=20131009&id=16982865.
82 Those dates are August 2, 2011, and October 17, 2013.
83 For current Treasury securities quotes, see the Wall Street Journal quote website: http://online.wsj.com/mdc/public/
page/2_3020-treasury.html?mod=topnav_2_3010#treasuryB.
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2013, sold with a yield of 2 bps.84 After enactment of a debt limit measure (H.R. 2775; P.L. 113-
46) on October 16, 2013, however, those yields returned to their previous levels.
Figure 2. Yields on Selected Treasury Bills that Mature After Projected Date of
Exhaustion of Borrowing Capacity
Source: Bloomberg and Nomura Holdings. Excerpted from Jens Nordvig and Ankit Sahni, Seeing Through the
Shutdown, Nomura FX Insights, October 1, 2013; update by Ankit Sahni.
Notes: The 13-week Treasury bill (cusip 912796BG3) matures October 24, 2013. The Treasury bill maturing
December 5, 2013, has cusip 912796BN8. A Treasury bill with cusip 9127953B5 matured on August 4, 2011.
Debt Limit Issues in 2013
Congressional consideration of federal debt policy raised several policy issues that were explored
in hearings and in broader policy discussions.
Hearings in 2013
On January 22, 2013, the House Ways and Means Committee held hearings on the history of the
debt limit and how past Congresses and Presidents have negotiated changes in the debt limit.85 On
84 See Treasury auction results announcement, October 8, 2013, http://www.treasurydirect.gov/instit/annceresult/press/
preanre/2013/R_20131008_1.pdf; and for September 4, 2013, https://www.treasurydirect.gov/instit/annceresult/press/
preanre/2013/R_20130904_1.pdf.
85 U.S. Congress, House Committee on Ways and Means, The Statutory Debt Limit, 113th Cong., 1st sess., January 22,
2013; materials available at http://waysandmeans.house.gov/news/documentsingle.aspx?DocumentID=316933.
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April 10, 2013, the House Ways and Means Subcommittee on Oversight held hearings on federal
debt and fiscal management when the debt limit binds.86
The Joint Economic Committee held hearings on the economic costs of uncertainty linked to the
debt limit on September 18, 2013.87
On October 10, 2013, the Senate Finance Committee held hearings on the debt limit and heard
testimony from Treasury Secretary Jacob Lew.88 On the same morning, the Senate Banking
Committee held hearings on the effects of a possible federal default on financial stability and
economic growth, and heard testimony from heads of financial industry trade associations.89
Debt Prioritization and H.R. 807
On April 30, 2013, the House Ways and Means Committee reported H.R. 807, which would grant
the Treasury Secretary the authority to borrow to fund principal and interest payments on debt
held by the public and the Social Security trust funds if the debt limit were reached.90 The
Treasury Secretary would also have had to submit weekly reports to Congress after that authority
were exercised. On May 9, 2013, the House passed and amended version of H.R. 807.91 The
House also passed a version of H.J.Res. 59 that incorporated the text of H.R. 807 on September
20. On September 27, the Senate passed an amended version of the measure that did not contain
provisions from H.R. 807. The Obama Administration indicated that it would veto H.R. 807 or
H.J.Res. 59 containing similar provisions, were either to be approved by Congress.92 The October
2013 debt limit measure (H.R. 2775; P.L. 113-46) contained no payment prioritization provisions.
H.R. 807 would have affected one aspect of the U.S. Treasury’s financial management of the
Social Security program, but would not alter other aspects. If the debt limit were reached, the
U.S. Treasury could still face constraints that could raise challenges in financial management. The
U.S. Treasury is responsible for (1) making Social Security beneficiary payments; (2) reinvesting
Social Security payroll taxes and retirement contributions in special Treasury securities held by
the Social Security trust fund; and (3) paying interest to the Social Security trust funds, in the
86 U.S. Congress, House Committee on Ways and Means, Subcommittee on Oversight, Examining the Government’s
Ability to Continue Operations When at the Statutory Debt Limit, 113th Cong., 1st sess., April 10, 2013.
87 U.S. Congress, Joint Economic Committee, The Economic Costs of Debt-Ceiling Brinksmanship, 113th Cong., 1st
sess., September 18, 2013; materials available at http://www.jec.senate.gov/public/index.cfm?p=Hearings&
ContentRecord_id=ee19780d-15a8-46bb-9cce-83acb969fc77&ContentType_id=14f995b9-dfa5-407a-9d35-
56cc7152a7ed&Group_id=cb5dcfe4-afee-419f-94ee-e51eb07de989.
88 U.S. Congress, Senate Committee on Finance, The Debt Limit, hearings, 113th Cong., 1st sess., October 10, 2013;
http://www.finance.senate.gov/hearings/hearing/?id=cb3ca699-5056-a032-52fb-9f23396c3f7c.
89 U.S. Congress, Senate Committee on Banking, Impact of a Default on Financial Stability and Economic Growth,
hearings, 113th Cong., 1st sess., October 10, 2013; materials available at http://www.banking.senate.gov/public/
index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=0c33e3f3-65cd-44f1-95b9-8a433ad1554c.
90 The Old-Age and Survivors Insurance Trust Fund (OASI) and the Disability Insurance Trust Fund (DI) are the two
Social Security trust funds.
91 The amendment, offered by Representative Camp, added a prohibition on funding Member compensation through
borrowing enabled by the measure. Treasury reporting requirements were also clarified.
92 OMB, Statement of Administration Policy, H.R. 807 Full Faith and Credit Act, May 7, 2013, available at
http://www.whitehouse.gov/sites/default/files/omb/legislative/sap/113/saphr807r_20130507.pdf; OMB, Statement of
Administration Policy, H.J.Res. 59 Continuing Appropriations Resolution, 2014, September 19, 2013, available at
http://www.whitehouse.gov/sites/default/files/omb/legislative/sap/113/saphjr59h_20130919.pdf.
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form of special Treasury securities, at the end of June and December.93 Those special Treasury
securities, either funded via Social Security payroll receipts or biannual interest payments, are
subject to the debt limit. Thus, sufficient headroom under the debt limit is needed to issue those
special Treasury securities. If the debt limit were reached and extraordinary measures were
exhausted, the Treasury Secretary’s legal requirement to reinvest Social Security receipts by
issuing special Treasury securities could at times be difficult to reconcile with his legal
requirement not to exceed the statutory debt limit.
Resolution of the Debt Limit Issue in October 2013
On September 25, Treasury Secretary Lew notified Congress that the government would exhaust
its borrowing capacity around October 17 according to updated estimates. At that point, the U.S.
Treasury would have had a projected cash balance of only $30 billion to meet federal obligations.
On October 16, 2013, Congress passed a continuing resolution (Continuing Appropriations Act,
2014; H.R. 2775; P.L. 113-46) that included a provision to allow a suspension of the debt limit.
That measure passed the Senate on an 81-18 vote.94 The House then passed the measure on a 285-
144 vote. The President signed the bill (P.L. 113-46) early the next morning. The measure
suspends the debt limit until February 8, 2014, once the President certified that the U.S. Treasury
would be unable to meet existing commitments without issuing debt.95 The President sent
congressional leaders a certification on October 17, 2013, to trigger a suspension of the debt limit
through February 7, 2014.96
That suspension, however, was subject to a congressional resolution of disapproval. If a
resolution of disapproval had been enacted, the debt limit suspension would end on that date.
Specific expedited procedures in each chamber governed the consideration of the resolution of
disapproval. The resolution, if passed, was subject to veto. A resolution of disapproval (H.J.Res.
99) was passed in the House on October 20, 2013, on a 222-191 vote. A similar measure, S.J.Res.
26, was not approved by the Senate, so the debt limit increase was not blocked.97
The debt limit suspension ended on February 7, and a limit was set to reflect the amount of debt
necessary to fund government operations before the end of the suspension. The U.S. Treasury was
precluded in P.L. 113-46 from accumulating excess cash reserves that might have allowed an
extension of extraordinary measures.
The debt limit provisions enacted in October 2013 resemble provisions enacted in 2011 and
earlier in 2013. For example, the Budget Control Act of 2011 (P.L. 112-25) also provided for a
93 See CRS Report RS20607, Social Security: Trust Fund Investment Practices, by Dawn Nuschler. Social Security
investment policy is governed by Section 201 of the Social Security Act (42 U.S.C. 401; http://www.ssa.gov/
OP_Home/ssact/title02/0201.htm).
94 The original version of H.R. 2775, entitled the “No Subsidies Without Verification Act,” passed the House on
September 12, 2013, on a 235-191 vote.
95 The debt limit provisions are included as Sec. 1002 of P.L. 113-46, entitled the “Default Prevention Act of 2013.”
96 The provision required that the Presidential certification be issued within three days of enactment.
97 A motion to proceed on S.J.Res. 26 was rejected on October 29, 2014, by a 45–54 vote.
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congressional resolution of disapproval of a debt limit increase. The suspension of the debt limit
in H.R. 2775 resembles the suspension enacted in February 2013 (H.R. 325; P.L. 113-3).98
Other Proposals Regarding the Debt Limit in October 2013
Passage of the Continuing Appropriations Act, 2014 was preceded by other proposals to modify
the debt limit. On October 8, 2013, Senate Majority Leader Reid introduced S. 1569, a measure
intended to ensure complete and timely payment of federal obligations. The measure would have
extended the suspension of the debt limit enacted in February 2013 (P.L. 113-3). On October 15,
2013, an announcement of a hearing on a proposal to amend the Senate amendment to H.J.Res.
59 appeared on the House Rules Committee website. That hearing, according to a subsequent
announcement, was postponed that evening. The measure would extend the debt limit through
February 15, 2014, and restrict the Treasury Secretary’s ability to employ extraordinary measures
through April 15, 2014. The measure would also extend discretionary funding at “sequester
levels” through December 15, 2013.99
The Debt Limit in Early 2014
The resolution of the debt limit episode and the ending of the federal shutdown in October 2013
set up a subsequent episode in early 2014.
Debt Limit Forecasts in Late 2013 and 2014
In late November 2013, CBO issued an analysis of Treasury cash flows and available
extraordinary measures.100 Treasury, according to those estimates, might exhaust its ability to
meet federal obligations in March. Because Treasury cash flows can be highly uncertain during
tax refund season, CBO stated that that date could arrive as soon as February 2014 or as late as
early June.
Goldman Sachs had estimated that Treasury would probably exhaust its headroom—the sum of
projected cash balances and remaining borrowing authority under the debt limit—in mid to late
March, but might in fortuitous circumstances be able to meet its obligations until June.101 While
Goldman Sachs and other independent forecasters noted that that the U.S. Treasury might
possibly avoid running out of headroom in late March or early April, waiting until mid-March to
address the debt limit could have raised serious risks for the U.S. government’s financial
situation.102
98 A discussion of that measure is below.
99 House Rules Committee, “House Amendment to Senate Amendment to H.J.Res. 59 Offered by Mr. Rogers of
Kentucky,” October 15, 2013, available at http://docs.house.gov/billsthisweek/20131014/BILLS-113hjres59-
HAmdt2a.pdf.
100 CBO, “Federal Debt and the Statutory Limit,” November 20, 2013, http://www.cbo.gov/publication/44877.
101 Alex Phillips, “Q&A on the Debt Limit,” Goldman Sachs US Daily, January 23, 2014.
102 Treasury’s headroom increases sharply in mid-June in large part due to corporate income tax receipts. Federal
corporate estimated income tax payments are due on the 15th day of the fourth, sixth, ninth, and twelfth months of the
corporation’s tax year. See the IRS tax calendar at http://www.irs.gov/publications/p509/
ar02.html#en_US_2014_publink100034257.
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Treasury Secretary Lew Notifies Congress in Early 2014
As the end of the debt limit suspension neared, the U.S. Treasury continued to warn Congress of
the consequences on not raising the debt limit. While the Treasury could again employ
extraordinary measures after the suspension ended after February 7, 2014, its ability to continue
meeting federal obligations would be limited by large outflows of cash resulting from individual
income tax refunds. In December 2013, the U.S. Treasury had notified congressional leaders that
according to its estimates, extraordinary measures would extend its borrowing authority “only
until late February or early March 2014.”103 On January 22, 2014, Secretary Lew called for an
increase in the debt limit before the end of debt limit suspension on February 7, 2014, or the end
of February.104 In the first week of February 2014, Secretary Lew stated that the U.S. Treasury
could not be certain that extraordinary measures would last beyond February 27, 2014.105
Debt Limit Suspension Lapses in February 2014
On February 7, 2014, the debt limit suspension ended and the U.S. Treasury reset the debt limit to
$17,212 billion.106 On the same day, the U.S. Treasury also suspended sales of State and Local
Government Series (SLGS), the first of its extraordinary measures.107 On February 10, Secretary
Lew notified Congress that he had declared a debt issuance suspension period (DISP) that
authorizes use of other extraordinary measures. In particular, during a DISP the Treasury
Secretary is authorized to suspend investments in the Civil Service and Retirement and Disability
Fund and the G Fund of the Federal Employees’ Retirement System. The DISP was scheduled to
last until February 27.108
Debt Limit Again Suspended Until March 2015
Following the lapse of the debt limit suspension, Congress moved quickly to address the debt
limit issue. On February 10, 2014, the House Rules Committee posted an amended version of S.
540 that would suspend the debt limit through March 15, 2015. The debt limit would be raised the
following day by an amount tied to the amount of borrowing required by federal obligations
103 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, December 19, 2013,
http://www.treasury.gov/initiatives/Documents/12-19-2013%20Debt%20Limit%20Letter%20FINAL%20Boehner.pdf.
104 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, January 22, 2014,
http://www.treasury.gov/initiatives/Documents/Debt%20Limit%20to%20Congress%201-22-2014.pdf.
105 U.S. Treasury, “Remarks of Secretary Jacob J. Lew at the Bipartisan Policy Center,” February 3, 2014;
http://www.treasury.gov/press-center/press-releases/Pages/jl2276.aspx; Treasury Secretary Jacob Lew, letter to House
Speaker John A. Boehner, February 7, 2014, http://www.treasury.gov/initiatives/Documents/
Debt%20Limit%20Letter%20020714.pdf.
106 U.S. Treasury, Daily Treasury Statement, February 10, 2014, https://www.fms.treas.gov/fmsweb/viewDTSFiles?
dir=w&fname=14021000.pdf.
107 U.S. Treasury, “Treasury Assistant Secretary for Financial Markets Matthew Rutherford February 2014 Quarterly
Refunding Statement,” February 5, 2014; http://www.treasury.gov/press-center/press-releases/Pages/jl2281.aspx. See
also U.S. Treasury, “Treasury Suspends Sales of State and Local Government Series Securities,” February 4, 2014,
http://treasurydirect.gov/news/pressroom/pressroom_1401slgsoff.htm. For information on these securities, see CRS
Report R41811, State and Local Government Series (SLGS) Treasury Debt: A Description, by Steven Maguire and
Jeffrey M. Stupak.
108 Treasury Secretary Jacob Lew, letter to House Speaker John A. Boehner, February 10, 2014,
http://www.treasury.gov/initiatives/Documents/02102014%20CSRDF%20G%20Fund%20Letter.pdf.
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during the suspension period. The U.S. Treasury would also be prohibited from creating a cash
reserve above that level. The measure also would have reversed a 1% reduction in the cost-of-
living adjustment for certain working-age military retirees that had been included in the
Bipartisan Budget Act of 2013 (BBA; P.L. 113-67).109 In addition, sequestration of non-exempt
mandatory spending would be extended from FY2023 to FY2024. CBO issued a cost estimate of
the measure on February 11, 2014.110
On February 11, 2014, the House voted 221-201 to suspend the debt limit (S. 540) through March
15, 2015. The amended measure included restrictions on Treasury debt management in the
version reported by the Rules Committee, but omitted provisions to reverse reductions in cost-of-
living adjustments to working-age military retiree pensions and an extension of non-defense
mandatory sequestration.111 The Senate voted to concur in the House amendment the following
day on a 55-43 vote. The President signed the measure (P.L. 113-83) on February 15, 2014.
Unlike previous measures that suspended the debt limit, a Presidential certification was not
required. A separate measure was also signed into law on the same day (P.L. 113-82) to reverse
reductions in cost-of-living adjustments to working-age military retiree pensions for those who
entered the military before the beginning of 2014.
Prospects for the Debt Limit in 2015
The current debt limit suspension extends until March 15, 2015. After the suspension lapses, the
statutory debt limit will be raised essentially by the amount of federal payments made during the
suspension period.
Treasury Secretary Lew is expected to declare a Debt Issuance Suspension Period (DISP) on
March 16, 2015, which would empower him to use extraordinary measures to meet federal fiscal
obligations. Independent forecasters expect those measures will suffice to meet federal
obligations until the fall of 2015.112 Figure 3 presents projections computed by Goldman Sachs
that indicate that Treasury’s headroom under the debt limit could be exhausted in October, or
under more fortuitous circumstances, in early November 2015. CBO’s projections of the date of
exhaustion are similar to outside forecasters.113 The date at which the U.S. Treasury would be
unable to meet obligations would most likely shift if federal tax collections diverge from
currently expected levels, or if major changes are made to spending or revenue policies.
109 For details on military retirement changes in the Bipartisan Budget Act and Consolidated Appropriations Act, 2014,
see CRS Report RL34751, Military Retirement: Background and Recent Developments, by David F. Burrelli and
Barbara Salazar Torreon.
110 CBO, S. 540, Temporary Debt Limit Extension Act, February 11, 2014, http://www.cbo.gov/publication/45101.
CBO estimated that the measure would increase mandatory spending by at least $5 billion in the decades after FY2024.
111 On February 11, 2014, the House also passed a separate measure (S. 25, P.L. 113-82) that ensured that reduced
annual cost-of-living adjustment to the retired pay of working-age military retirees required by the Bipartisan Budget
Act would not apply to those who joined the Armed Forces before January 1, 2014. That measure was passed on a 326-
90 vote. The Senate agreed to the House changes on a 95-3 vote on the next day. The President signed the bill into law
on February 15, 2014.
112 Alex Phillips, “A Slightly Smaller Budget Deficit in FY2015” Goldman Sachs US Daily, January 27, 2015;
Wrightson ICAP, The Money Market Observer, January 26, 2015.
113 CBO, Federal Debt and the Statutory Limit,” March 2015, https://www.cbo.gov/sites/default/files/cbofiles/
attachments/49961-DebtLimit.pdf.
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Figure 3. Projection of U.S. Treasury Headroom Under Debt Limit
Source: Alex Phillips, Goldman Sachs Global Investment Research calculations based on U.S. Treasury and other
data.
Notes: Projections of Treasury’s cash flows are subject to significant uncertainties.
Treasury Actions in 2015
Treasury Secretary Lew sent congressional leaders a letter on March 6, 2015, stating that
Treasury would suspend issuance of State and Local Government Series (SLGS) bonds on March
13, 2015, the last business day during the current debt limit suspension. SLGS are used by state
and local governments to manage certain intergovernmental funds in a way that complies with
federal tax laws.114
Author Contact Information
D. Andrew Austin
Analyst in Economic Policy
aaustin@crs.loc.gov, 7-6552
114 See CRS Report R41811, State and Local Government Series (SLGS) Treasury Debt: A Description, by Steven
Maguire and Jeffrey M. Stupak.
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