PART 4 OTHER MATTERS WITHIN THE JURISDICTION OF THE COMMITTEE ON WAYS AND MEANS Section 1. Public Debt and Debt Management Section 2. The Federal Financing Bank Section 3. Pension Benefit Guaranty Corporation Section 1. Public Debt and Debt Management An increase in the gross public debt during a fiscal year is approximately equal to the Federal funds deficit plus the deficit of off-budget Federal entities. The Federal funds deficit reduced by trust fund surpluses equals the unified budget deficit. Federal funds receipts are derived mainly from taxes and are used for the general purposes of the Government. The trust funds collect certain taxes and other receipts for specified purposes, such as payment of social security benefits, in accordance with the terms of a trust agreement or statute. Thus, even if the unified budget were in balance, the public debt would still increase if the Federal funds were in a deficit position and the trust funds accumulating an offsetting surplus. În general, trust fund surpluses are invested in special issue public debt securities. Even if both Federal funds and trust funds were in balance, the gross public debt would increase if the off-budget Federal entities were in a deficit position. The largest of the off-budget Federal entities, in terms of its deficit, is the Federal Financing Bank discussed below in Section 2. An increase in the gross public debt is not precisely equal to the Federal funds deficit plus the deficit of off-budget Federal entities because, to a limited extent, deficits can be financed by means other than borrowing. For example, if the Federal Government ends the fiscal year with a smaller cash balance than at the beginning of the year, that decline in the cash balance would substitute for borrowing from the public. This section has focused primarily on the deficit and increases in the public debt. It is, of course, possible for the public debt to decline. For example, this would occur if a Federal funds surplus exceeded the deficit of off-budget Federal entities. If at the same time the trust funds were in a surplus position, investment of those surpluses in public debt securities would be accomplished by the Treasury not issuing new debt to replace maturing debt held by the public and instead issuing new special issues to the trust funds. In economic terms, the debt held by the public-that is the amount that excludes the debt held by trust funds-has much more significance than the total debt outstanding. The range of possible impacts of the deficits or surpluses of Federal funds, trust funds, and off-budget Federal entities on the unified budget deficit, gross public debt and debt held by the public is summarized in the table below. For example if the Federal funds account is in deficit, the unified budget deficit will be larger, as will be the gross public debt and the debt held by the public. Table 1 provides actual information on the budget and public debt. Table 2 shows the outstanding amount of both gross public debt and debt subject to limit since 1970. The gross public debt is larger than the amount subject to limit primarily because certain debts issued by Federal agencies are not, by statute, subject to the debt ceiling. The amount of such agency debt outstanding has been reduced in recent years. For a more complete discussion of the budget and debt concepts see special analyses C and E in Special Analyses, Budget of the United States Government, Fiscal Year 1983. Statutory limitations have traditionally been placed on Federal debt. Until World War I, the Congress ordinarily authorized a specific amount for each debt issue. Beginning with the Second Liberty Bond Act of 1917, however, the nature of the limitation was modified in several steps until it developed into a ceiling on the total amount of most Federal debt outstanding. The latter type of limitation has been in effect since 1941. Since 1971, the statutory debt limit has consisted of a permanent limit of $400 billion plus a temporary increment that usually expired in a year or less. Since the debt subject to limit has been more than $400 billion, new legislation has been required no later than the expiration date of each temporary increment. Three times in recent years the temporary increment has expired without having been extended, so for a few days on each occasion the Federal debt exceeded the statutory limit. The validity of debt issued prior to the expiration of the temporary ceiling was not affected, but the Treasury Department had to suspend all sales of savings bonds and other debt securities until a new temporary ceiling was enacted. The debt ceiling was most recently increased to $1,079.8 billion, for the period October 1, 1981, through September 30, 1982, by Public Law 97-45, approved September 30, 1981. This Act was passed under rules enacted in 1979 that integrate the House's procedure for setting of the public debt limit with the congressional budget process. Under this procedure (House Rule XLIX), when the conference report on a budget resolution is adopted and specifies a public debt limit for a fiscal year which differs from the statutory limit in effect, the Enrolling Clerk of the House prepares a joint |