Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market
Why GAO Did This Study
GAO has prepared this report to assist Congress in identifying and addressing debt management challenges. Since 1995, the statutory debt limit has been increased 12 times to its current level of $14.294 trillion. The Department of the Treasury (Treasury) recently notified Congress that the current debt limit could be reached as early as April 5, 2011, and the Congressional Budget Office (CBO) projects that under current law debt subject to the limit will exceed $25 trillion in 2021.
This report (1) describes the actions that Treasury traditionally takes to manage debt near the limit, (2) analyzes the effects that approaching the debt limit has had on the market for Treasury securities, and (3) describes alternative mechanisms that would permit consideration of the link between policy decisions and the effect on debt when or before decisions are made. GAO analyzed Treasury and market data; interviewed Treasury officials, budget and legislative experts, and market participants; and reviewed practices in selected countries.
What GAO Recommends
To avoid potential disruptions to Treasury markets and help inform fiscal policy decisions in a timely way, Congress should consider ways to better link decisions about the debt limit with decisions about spending and revenue.
Treasury provided technical comments on a draft of this report, which GAO incorporated as appropriate. Full Report
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