Updated April 26, 2023
The Debt Limit
Overview
borrowing; or (3) temporarily suspend or abolish the debt
limit. Maintaining the current debt limit could lead
The debt limit places a statutory constraint on the amount of
Treasury to implement “extraordinary measures” to
money that Treasury may borrow to fund federal
postpone a binding debt limit, but such measures do not
operations. Federal debt reached its current debt limit of
prevent a binding debt limit indefinitely. Some have
$31.38 trillion in January 2023, and Treasury is currently
implementing “extraordinary measures” to prevent
suggested that the Fourteenth Amendment may grant the
a
President authority to ignore the statutory debt limit.
binding debt limit. Congress may debate the merits of
Previous Administrations and many representatives of the
various debt limit modifications in advance of the
legal community have rejected that argument as an
exhaustion of such extraordinary measures, presently
alternative to debt limit legislation.
projected to occur between June and September 2023. This
In Focus provides background information and discusses
Inaction or Delayed Action: Potential
recent legislative activity.
Consequences
More information on the debt limit can be found in CRS
The combination of a binding debt limit and continued
Report R41633, Reaching the Debt Limit: Background and
budget deficits would leave Treasury with conflicting
Potential Effects on Government Operations; CRS Report
directives. As with any borrower, the government is obliged
R43389, The Debt Limit Since 2011; CRS Report R45011,
to pay its bills, and yet a binding debt limit would prevent
Clearing the Air on the Debt Limit; and CRS Report
Treasury from doing so in a timely fashion. Possible
R44383, Deficits, Debt, and the Economy: An Introduction.
consequences of a binding debt limit include, but are not
Rationale and Role of the Debt Limit
limited to, the following:
reduced ability of Treasury to borrow funds on
The Constitution grants Congress the “power of the purse,”
advantageous terms, thereby further increasing federal
which allows Congress to restrict the amount of federal
debt;
debt. Under current law Congress exercises this power
through the federal debt limit, which is codified at 31
substantial negative outcomes in global economies and
U.S.C. §3101. Debt subject to limit is more than 99% of
financial markets caused by anticipated default on
total federal debt, and includes debt held by the public
Treasury securities or failure to meet other legal
(which is used to finance budget deficits) and debt issued to
obligations;
federal government accounts (which is used to meet federal
acquisition of interest penalties from delay on certain
obligations).
federal payments and transfers; and
Federal debt increases when total expenditures exceed total
downgrades of U.S. credit ratings, which could
receipts (producing a budget deficit). Expansion of the
negatively impact capital markets.
federal lending portfolio, through programs like college
student loans, also increases federal debt levels. Periods of
Possible economic and fiscal consequences of the debt limit
sustained debt increases bring debt levels near the debt
are not confined to scenarios where the debt limit is
limit. CBO’s February 2023 baseline projected that the debt
binding. Protracted deliberation over raising the debt limit
subject to limit will be $41.2 trillion at the end of FY2028
may also affect the U.S. financial outlook if it changes
and $52.0 trillion by the end of FY2033; debt held by the
household and business behavior. Some research suggests
public is forecast to equal $34.6 trillion and $46.4 trillion in
that debate over the debt limit in August 2011 reduced
those respective years.
economic expansion in the second half of that year.
The federal debt limit acts as a check to ensure that recent
revenue and expenditure trends meet the approval of
“Because the debt ceiling impasse contributed to the
Congress. However, the federal collection and spending
financial market disruptions, reduced confidence and
decisions affecting debt levels may have been agreed to by
increased uncertainty, the economic expansion [in
Congress and the Administration well in advance of debt
2011] was no doubt weaker than it otherwise would
limit deliberations. Some past debt limit legislation has
have been.”—U.S. Treasury, The Potential
linked debt limit increases with fiscal policy proposals such
Macroeconomic Effect of Debt Ceiling Brinkmanship,
as budget enforcement measures.
October 2013.
Options for Congress
Increasing the Debt Limit
When debt levels approach the statutory debt limit,
Congress can choose to (1) leave the debt limit in place; (2)
Increasing the debt limit to accommodate further borrowing
increase the debt limit to allow for further federal
allows federal operations to continue as they otherwise
https://crsreports.congress.gov
link to page 2 
The Debt Limit
would have. Increasing the debt limit reduces the likelihood
divided between debt held by the public and
of experiencing potential consequences associated with a
intragovernmental debt. Although nominal debt levels have
binding and near-binding debt limit.
steadily risen in the postwar period, debt measured as a
percentage of GDP (real debt) declined precipitously for
Larger increases in the debt limit allow more time to enact
several decades following its peak at 118% in 1946,
changes that adjust budgetary trends, but could reduce the
reaching 32% in 1981. Real debt has increased in the recent
effect of the debt limit on budgetary discussions if
decades. At the end of FY2022, total debt subject to the
policymakers feel less constrained by the new debt limit
limit was 123% of GDP and publicly held debt was 97% of
level. Smaller debt limit increases potentially offer a greater
GDP. The remaining 26% of GDP in debt took the form of
role for the debt limit legislation in budgetary policy
intragovernmental debt.
discussions, but may lead to more frequent debt limit
activity.
Figure 1. Federal Debt Subject to Limit as a
Percentage of GDP, FY1940-FY2022
“Extraordinary Measures” and Debt Limit
Suspension
Invoking Treasury’s authority to use “extraordinary
measures” to stay under the debt limit and temporarily
suspending the debt limit both postpone when Congress
must act on debt limit legislation. The authority for using
such “extraordinary measures,” which include suspensions
and delays of some debt sales and auctions,
underinvestment and disinvestment of certain government
funds, and exchange of debt securities for debt not subject
to the debt limit, rests with the Treasury Secretary.
Invocation of “extraordinary measures” has delayed
required action on the debt limit by periods ranging from a
few weeks to several months. Temporary suspensions delay
the restrictions imposed by the debt limit for a period
determined by corresponding legislation, and have been
Source: Office of Management and Budget, Department of the
used in lieu of increasing the debt limit to a specific dollar
Treasury and Congressional Budget Office. Figure created by CRS.
value in recent years.
Note: Values taken at the end of the fiscal year.
Past Debt Limit Activity
Timing Uncertainties with a Binding
Debt Limit
In December 2021, Congress approved a joint resolution
(P.L. 117-73) that increased the debt limit by $2.5 trillion,
Short-term fluctuations in federal debt levels mean there is
to $31.38 trillion. If action is not taken to prevent a binding
substantial uncertainty as to when debt levels will meet or
debt limit as federal debt approaches the debt limit, the
exceed the statutory debt ceiling. Federal debt levels change
Treasury Secretary may elect to exercise “extraordinary
in response to variation in the timing of payments and
measures” to stay beneath the debt limit.
collection of receipts. This fluctuation is influenced by
changes in the size and timing of incoming and outgoing
Regular legislative modifications to the debt limit have
Treasury payments, and is relatively insensitive to long-
been enacted since the aggregate debt limit was first created
term deficit outcomes. Examples include lower debt levels
in 1917. Congress has approved 102 separate debt limit
that follow large income tax receipt collections in March
modifications between the end of World War II and the
and April and higher debt levels caused by interest
present to accommodate the changes in federal debt levels.
payments and the issuance of Treasury securities in the
Debt held by the public has consistently increased in that
middle and end of a given month. Short-term surpluses
time period, except in the period immediately following
could extend the amount of time “extraordinary measures”
World War II and between 1998 and 2001 when debt
taken by Treasury would delay a binding debt limit, while
declined due to federal budget surpluses.
short-term deficits would have the opposite effect.
Congress has approved 20 distinct changes to the debt limit
As of April 2023, budget experts project that the
since 2001. Much of the recent increase in the debt is
extraordinary measures invoked by the Treasury Secretary
attributable to a rise in debt held by the public. Increases in
will be exhausted between June and September of 2023.
spending on old-age and retirement programs, lower tax
Those estimates are subject to considerable uncertainty,
receipts, and federal activities related to the Great
however, as small fluctuations in economic output could
Recession and in response to the COVID-19 pandemic have
significantly shift when such action would be needed.
all contributed to rising debt levels. Debt held in
government accounts has also increased since 2001, as
Grant A. Driessen, Specialist in Public Finance
Social Security payroll tax receipts exceeded payments to
beneficiaries for much of that period.
IF10292
Figure 1 shows the debt subject to the limit as a percentage
of GDP from 1940 to 2022, along with how that debt was
https://crsreports.congress.gov
The Debt Limit
Disclaimer
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congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
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