What other ways could Congress authorize debt?

To minimize disruptions to the Treasury market and to help inform fiscal policy debate in a timely way, we recommended that decisions about giving Treasury the authority to borrow be made when decisions about spending and revenues are made. In 2015, we also conducted a forum with experts in the field and identified three potential approaches to delegate borrowing authority. Each option would minimize disruptions to the market while linking decisions about debt to decisions about spending and revenue at the time that those decisions are made. All of the options also maintain congressional control and oversight over federal borrowing. We did not endorse any specific option.

Option 1: Link action on the debt limit to the budget resolution

This is a variation of a previously used approach under which passage of a congressional budget resolution would automatically introduce separate legislation raising the debt limit to the level envisioned in the resolution. This legislation would either be deemed to have passed with the budget resolution or be voted on separately immediately thereafter using expedited procedures. In either case, the President would need to sign it for it to become law.

Potential outcomes of this approach include:

  • making clear the relationship between spending and revenue decisions in the budget resolution and the debt implied by those decisions;
  • giving Congress the ability to take more immediate action to affect debt by incorporating changes to revenue and spending at the time that Congress passes its annual budget plan; and
  • minimizing potential disruptions to the market by shifting the timing of the debate so that it occurs before debt is already at the limit.

Design issues to consider include:

  • How should the debt limit be linked to the budget resolution?
  • How would voting occur?
  • How should this policy account for legislative and economic changes not included in the budget resolution?

Option 2: Provide the administration with the authority to increase the debt limit, subject to a congressional motion of disapproval

This is a variation of an approach contained in the Budget Control Act of 2011. Congress would give the administration the authority to propose a change in the debt limit, which would take effect absent enactment of a joint resolution of disapproval within a specified time frame.

Potential outcomes of this approach include:

  • preserving Congress's ability to directly debate the current trajectory of federal debt;
  • reducing the likelihood of market disruption and damage to the economy by changing the results of a lack of congressional action from a potential default to a debt limit increase; and
  • being viewed by some as insufficiently linking congressional decisions about spending and revenue to the impact on debt.

Design issues to consider include:

  • Should Congress specify criteria or require accompanying explanatory information for proposed debt limit increases? If so, what should they be?
  • How should Congress structure the vote on a joint resolution of disapproval?
  • How much time should Congress be afforded to debate and pass a motion of disapproval before a change to the debt limit takes effect?

Option 3: Delegating broad authority to the administration to borrow as necessary to fund enacted laws

This is an approach used in some other countries: delegate to the administration the authority to borrow such sums as may be necessary to fund implementation of the laws duly enacted by Congress and the President. Congress would maintain control over the amount of federal borrowing because laws that affect federal spending and revenue and create the need for debt already require adoption by the Congress.

Potential outcomes of this approach include:

  • removing the dangers that accompany the fear of default by the U.S. government by ensuring Treasury has the authority it needs to borrow to fund all previously authorized spending;
  • permitting flexibility with respect to changes in the economy and legislation; and
  • being viewed by some as not having enough focus on the link between spending and revenue decisions and the level of debt incurred.

Design issues to consider include:

  • What form should congressional oversight of Treasury debt management take in light of this delegation of authority?
  • What reports might be required from Treasury, and at what frequency?