The Debt Limit: History and Recent Increases
April 5, 2011 - RL31967
Total debt of the federal government can increase in two ways. First, 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. Total federal debt outstanding was $14,251 billion on April 1, 2011. The U.S. Treasury projects the federal debt will reach its statutory limit before May 16, 2011, although extraordinary measures could extend Treasury's borrowing capacity until July 8, 2011. Tax policy, spending changes, and economic trends could affect that timing. Without a debt limit increase, funding federal operations after the middle of 2011 may be complicated. A statutory limit has restricted total federal debt since 1917, when Congress passed the Second Liberty Bond Act. Congress has voted to raise the debt ...