On a number of occasions over the last four years, the U.S. government was operating at the debt limit (meaning additional debt could not be issued using normal operations). During these times, the Treasury Department used extraordinary measures to generate additional cash to meet financial obligations while still complying with the debt limit. On March 16, 2015, when the debt limit is scheduled to be reinstated from its current suspension, Treasury will again begin to deploy its extraordinary measures. (See p. 4 for BPC’s estimates of their size and duration.) These measures, which have been used since their creation in the 1980s, are a source of confusion to many. What follows is a brief explanation of what they are, how they work, and the limits of the measures.
What Are They?
Existing statutes allow Treasury to change the normal operations of certain government accounts when the debt limit is reached. While there are a handful of extraordinary measures, most of the Treasury’s flexibility derives from three measures that allow it to reduce the amount of intragovernmental debt. This is debt that is not sold to the public, but rather issued to government funds. The most well-known example of a government fund is the Social Security Trust Fund, which is composed of special Treasury securities. Notably, the Social Security Trust Fund is not part of the extraordinary measures.