What is the debt limit?
Congress and the President have enacted laws to establish a limit on the amount of federal debt that can be outstanding at one time. The outstanding total federal debtThe total amount of outstanding federal debt, whether issued by the Treasury or other federal agencies and held by the public or federal government accounts. excluding some minor adjustments, is the measure that is subject to the federal debt limitA legal ceiling on the amount of outstanding total federal debt (excluding some minor adjustments), which must be raised periodically to accommodate additional federal borrowing.. The debt limit does not restrict Congress' ability to enact spending and revenue legislation that affect the level of debt or otherwise constrain fiscal policy; rather, the debt limit restricts the Department of the Treasury's authority to borrow to finance the decisions enacted by the Congress and the President (for more information, see Debt Limit: Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market). As a result, as the government nears the debt limit, Treasury often deviates from its normal cash and debt management operations. In the past, Treasury has taken a number of extraordinary actions such as temporarily disinvesting securities held as part of federal employees' retirement plans to meet the government's obligations as they came due without exceeding the debt limit, until the debt limit was raised. Congress and the President may also enact laws that temporarily suspend the statutory debt limit, which they did twice in calendar year 2013, through provisions in the No Budget, No Pay Act of 2013 (Public Law 113-3, section 2) and the Default Prevention Act of 2013 (Public Law 113-46, section 1002). For more information on the debt limit and extraordinary actions, see:
- Debt Limit: Analysis of 2011-2012 Actions Taken and Effect of Delayed Increase on Borrowing Costs
- The Effects of Delays in Increasing the Debt Limit
- Debt Ceiling: Analysis of Actions Taken During the 2003 Debt Issuance Suspension Period
- Debt Ceiling: Analysis of Actions During the 2002 Debt Issuance Suspension Periods
- Debt Ceiling: Analysis of Actions During the 1995-1996 Crisis