DESCRIPTION OF THE “DEBT REDUCTION

RECONCILIATION ACT OF 2000”

Scheduled for Markup

By the

HOUSE COMMITTEE ON WAYS AND MEANS

on June 8, 2000

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

June 6, 2000

JCX-55-00
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 Debt not subject to the public debt limit comprise unamortized discount on Treasury

bills and zero-coupon Treasury bonds, certain old debt, debt held by the Federal Financing Bank,

and certain guaranteed debt.

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DEBT REDUCTION RECONCILIATION ACT OF 2000

Present Law

The public debt outstanding comprises the total face amount or principal of marketable

and non-marketable securities currently outstanding. With the exception of certain debt,1

currently representing less than $100 billion, the Congress has established a public debt limit that

represents the maximum amount of money the Government is allowed to borrow without

receiving additional authority from Congress. Debt subject to the public debt limit generally

includes debt owed to the public which comprises all Federal securities held by individuals,

corporations, State and local governments, foreign governments, and other foreign persons, and

debt held by the Government which comprises Federal securities held by Government trust

funds, revolving funds, and special funds.

The statutory limit on the public debt currently is $5.95 trillion. It was set at this level in

the Balanced Budget Act of 1997 (P.L. 105-33), enacted into law on August 5, 1997. 

With the approval of the President, the Secretary of the Treasury may use money received

from the sale of bonds or notes of the United States and other money in the general fund of the

Treasury to make purchases, redemptions, or refunds of bonds, notes, certificates of

indebtedness, Treasury bills, or savings certificates of the United States Government at or before

maturity of such instruments of indebtedness.

By June 1 of each year, the Secretary of the Treasury must submit a report to Congress

regarding the Treasury’s public debt activities.

Description of Proposal

The proposal would establish an account in the Treasury to be called the Public Debt

Reduction Payment Account (“the Account”). Under the proposal, an amount of money would

be deposited into the Account out of any money in the Treasury not otherwise appropriated. The

amount of money to be deposited would be equal to the value of the Congressional Budget

Office’s (“CBO”) projection submitted pursuant to section 202(e)(2) of the Congressional

Budget Act of 1974 of the fiscal year 2000 surplus in excess of the amount of fiscal year 2000

surplus specified in the concurrent budget resolution for fiscal year 2001. Amounts appropriated

to the Account may only be expended to redeem or buy at maturity public debt held by the

public. The proposal would provide that the Account has off-budget status. The proposal would

further provide that any official statement regarding surplus or deficit totals of the Federal

Government issued by the Office of Management and Budget, the CBO, or any other agency of
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the Federal Government would exclude the outlays and receipts of the Account. The outlays and

receipts of the Account would be submitted in separate budget documents.

In addition, the proposal would reduce the statutory limit on the public debt by the

amount deposited into the Account. That is, the current statutory debt limit of $5.95 trillion

would be reduced by an amount of money equal to the value of the CBO’s projection submitted

pursuant to section 202(e)(2) of the Congressional Budget Act of 1974 of the fiscal year 2000

surplus in excess of the amount of fiscal year 2000 surplus specified in the concurrent budget

resolution for fiscal year 2001.

The proposal would require the Secretary of the Treasury to make three reports to

Congress related to the Account. The first report would be due within 30 days after the

appropriation is deposited into the Account. This report would confirm the establishment of the

account and provide an description of the Secretary’s plan for using the money deposited into the

account to retire debt held by the public. A second report would be due no later than October 31,

2000. In this report, the Secretary would account for money used from the Account to reduce

debt held by the public during fiscal year 2000. The third report would be due no later than

October 31, 2001. This report would provide a detailed accounting of the debt redeemed from

amounts deposited into the Account. The proposal would further require that the Comptroller

General verify the accuracy of the Secretary’s reports not later than November 15, 2001.

Effective Date

The proposal would be effective on the date of enactment.