Debt Limit Research

Researchers at Brooklyn Law School can learn more about the ongoing debt limit talks by reading the June 2011 Congressional Research Service Report, Reaching the Debt Limit: Background and Potential Effects on Government Operations which states in its summary that

The gross federal debt, which represents the federal government’s total outstanding debt, consists of two types of debt: (1) debt held by the public and (2) debt held in government accounts, also known as intragovernmental debt. Federal government borrowing increases for two primary reasons: (1) budget deficits and (2) investments of any federal government account surpluses in Treasury securities, as required by law. Nearly all of this debt is subject to the statutory limit. The federal debt limit currently stands at $14,294 billion.

The Report, which has an Appendix of a Detailed History on Past Treasury Actions During Previous Debt Limit Crises, is divided into these sections:

• Federal Government Debt and the Debt Limit

• The Debt Limit and the Treasury

• Past Treasury Actions to Postpone Reaching the Debt Limit

• Current Treasury Actions in 2011 Surrounding the Debt Limit

• Potential Implications of Reaching and Not Raising the Debt Limit

• Possible Options for Treasury: Could Prioritization Be Used?

• Possible Options for OMB: Could Apportionment Be Used?

• Potential Impacts on Government Operations

• Potential Impacts on Programs Generally

• Potential Impacts on Programs with Trust Funds

• Distinction Between a Debt Limit Crisis and a Government Shutdown

• Potential Economic and Financial Effects

• Considerations for the Current Debt Limit Debate

• Views on the Debt Limit, Prioritization, and Default

• Can an Increase in the Current Debt Limit be Avoided?

• How Much Should the Debt Limit Be Raised?

• Implications of Future Federal Debt on the Debt Limit

A more detailed February 2011 GAO Report on the Debt Limit, Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market, recommends that Congress should consider ways to better link decisions about the debt limit with decisions about spending and revenue. Also of interest is Train Wrecks, Budget Deficits, and the Entitlements Explosion: Exploring the Implications of the Fourteenth Amendment’s Public Debt Clause by Michael Abramowicz who concludes

Although the Public Debt Clause is underdeveloped, it is not a constitutional relic. The language and history of the Clause indicate that it was not merely a prohibition on the repudiation of Civil War bonds. Rather, the Clause was and is a promise that Congress will pay its debts. The Clause applies at least to governmental promises embodied in written agreements with debt-holders, and Congress cannot take any action making it possible that the government will break such promises.