LegiStorm

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. 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 debt limit was suspended through March 15, 2015. The next day the limit was set at $18.1 trillion and Treasury Secretary Jacob Lew invoked authorities to use extraordinary measures to meet federal obligations. On October 15, 2015, Secretary Lew stated that extraordinary measures would be exhausted no later than November 3, 2015, although a relatively small cash reserve would be on hand. Independent forecasts had expected that the U.S. Treasury could pay federal obligations until November 2015. Lower tax receipts and higher trust fund investments, however, reduced Treasury’s headroom more than had been expected. On October 28, 2015, the House concurred with Senate amendments to H.R. 1314, as amended, known as the Bipartisan Budget Act of 2015, which would suspend the debt limit until March 15, 2017. The Senate approved the measure on October 30, 2015, and the President signed it (P.L. 114-74) three days later. Total federal debt increases when the government sells debt to the public to finance budget deficits, which adds to debt held by the public, or 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—which adds to debt held by government accounts; or when new federal loans outpace loan repayments. 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.