Prior to 1939, Congress needed to approve each incidence of debt issuance. The 1939 Public Debt Acts consolidated this process and set a limit for the amount of debt the Treasury could issue in any given year. The debt ceiling has been raised over 80 times, in a wide variety of political environments, since its inception due to the growing size of the U.S. economy and its resources, and in response to evolving government initiatives. The current limit was reached earlier this year, meaning that the Treasury had to borrow from certain trust funds to continue meeting its obligations in the absence of issuing debt. In order to issue additional debt to fund previously approved congressional spending, Congress must authorize a higher debt ceiling limit.
The date on which the Treasury would lack needed funds is referred to as the “x-date.” Depending on the pace and quantity of government receipts, the “x-date” could be as early as June 5, 2023. To avert a potential US default, Congressional leaders and the White House drafted an agreement to suspend the debt ceiling through January 1, 2025. The House and the Senate have approved the bill and President Biden is expected to sign it imminently.
Similar to past instances, such as 2011 and 2013, when negotiations went close to the “x-date”, market volatility increased. In 2011, S&P - a major ratings agency - downgraded the US to AA+ from AAA to reflect concern about the debt ceiling negotiations at that time. Although the situation was resolved without a default, S&P never raised the credit rating of the US back to AAA.
Corebridge’s financial professionals continue to monitor developments and our financial position, as reflected by our balance sheet, is strong.