A New Approach to the Public Debt Legislation Should Be Considered

Congressional action is required to extend the temporary ceiling on the public debt before it expires on September 30, 1979 or the ceiling reverts to the permanent level which is insufficient to allow the Treasury to borrow money to refund the maturing debt as well as to pay other legal governmental obligations. Reversions occurring in August 1978 and April 1979 caused undesirable conditions which increased the Government's operating costs substantially, created conditions that were costly to the public, and caused the Treasury to use the exchange stabilization fund to circumvent the intent of the public debt ceiling. The possibility exists that public debt legislation would be delayed long enough to cause a default. The Treasury has estimated that it will have about $15 billion in cash on September 30, 1979. This plus estimated collections will be sufficient to meet projected cash needs through October 3. To operate beyond that date, the Treasury would have to take emergency action to raise the cash needed to refund maturing securities and to pay the deficit from current operations. After the Treasury's cash is depleted a default on Government obligations would become a reality having a devastating effect on the economy and the public welfare. GAO believes these adverse effects are related to the present congressional approach in enacting temporary increases to the public debt ceiling. It is recommended that Congress make the current amount of the temporary ceiling a permanent ceiling and consider any future substantive increases permanent unless definite prospects exist in the near future to reduce the debt. It is also recommended that an approach be developed to adjust the ceiling that would take advantage of existing legislation. A debt ceiling bill could be considered by Congress simultaneously with its consideration of the second budget resolution, or the debt ceiling bill could be considered immediately following action on the budget resolution. Either approach would allow the debt legislation to retain its separate identity and become public law upon approval by the President.