Total federal debt 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. On August 2, 2011, President Obama signed
the Budget Control Act of 2011 (BCA; S. 365; P.L. 112-25), after an
extended debt limit episode. The federal debt had reached its legal
limit on May 16, 2011, prompting Treasury Secretary T. Geithner to
declare a debt issuance suspension period, allowing certain
extraordinary measures to extend Treasury's borrowing capacity. The
BCA included provisions aimed at deficit reduction and allowing the
debt limit to rise between $2,100 billion and $2,400 billion 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, $1.2
trillion increase on January 28, 2012. On January 18, 2012, the
House passed a disapproval measure (H.J.Res. 98) on a 239-176 vote.
The Senate declined to take up a similar measure (S.J.Res. 34), on
a 44-52 vote on January 26, 2012. On December 26, 2012, the U.S.
Treasury stated that the debt will reach its limit on December 31.
Extraordinary measures will then be used to meet federal payments.
CBO estimates those measures could fund the government until
mid-February or early March 2013. Congress has always placed
restrictions on federal debt. The form of debt restrictions,
structured as amendments to the Second Liberty Bond Act of 1917,
evolved into a general debt limit in 1939. Congress has voted to
raise the debt limit 11 times since 2001, due to persistent
deficits and additions to federal trust funds. Congress raised the
limit in June 2002, and by December 2002 the U.S. Treasury asked
Congress for another increase, which passed in May 2003. In June
2004, the U.S. Treasury asked for another debt limit increase and
again in October 2004, enacted on November 19, 2004. In 2005,
reconciliation instructions in the FY2006 budget resolution
(H.Con.Res. 95) included a debt limit increase. After warnings from
the U.S. Treasury, Congress passed an increase that the President
signed on March 20. In 2007, Congress approved legislation
(H.J.Res. 43) to raise the debt limit by $850 billion to $9,815
billion that the President signed September 29, 2007. The recent
economic slowdown led to sharply higher deficits in recent years,
which led to a series of debt limit increases. The Housing and
Economic Recovery Act of 2008 (H.R. 3221), signed into law (P.L.
110-289) on July 30, 2008, included a debt limit increase. The
Emergency Economic Stabilization Act of 2008 (H.R. 1424), signed
into law on October 3 (P.L. 110-343), raised the debt limit again.
The debt limit rose a third time in less than a year to $12,104
billion with the passage of the American Recovery and Reinvestment
Act of 2009 on February 13, 2009 (ARRA; H.R. 1), signed into law on
February 17, 2009 (P.L. 111-5). Following that measure, the debt
limit was subsequently increased by $290 billion to $12,394 billion
(P.L. 111-123) in a stand-alone debt limit bill on December 28,
2009, and by $1.9 trillion to $14,294 billion on February 12, 2010
(P.L. 111-139), as part of a package that also contained the
Statutory Pay-As-You-Go Act of 2010.
General
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