Are There Limits As to How Many Treasury Bonds the Government Can Sell?

The United States federal government can sell as many bonds as it wants until the outstanding government debt reaches the debt ceiling, which is a limit set by Congress. The Treasury creates and auctions off bonds to cover the costs of the government that revenue cannot cover. The Treasury stops selling bonds, which make up most of the government's debt, once debt hits the ceiling.

Treasury Bonds

The Treasury sells a wide variety of bonds and other financial products to investors and other countries as a way of raising money to pay for government expenses. The bonds state the amount of money that the investor initially paid and the interest that the Treasury will pay the investor for the use of that money for a set number of years. The Treasury pays the bond holder interest every year and at the end of the bond's life gives the investor back the amount of money she initially paid.

Treasury Role

The Treasury manages the government's finances and finds ways to spend, save and invest once Congress passes the yearly budget. The federal government spends more money than it takes in most years and the Treasury is responsible for raising the extra money to cover operating costs, as well as paying interest on debts and paying off debt when possible.

Government Debt

All governments borrow money to cover its expenses by issuing bonds, which they buy back or pay down routinely. However, the United States' government debt is the largest of any country at over $14,294,000,000,000 in May 2011. Congress controls how much debt the country can take on by setting a limit, which it has raised every time the debt ceiling has been reached.

Treasury Actions

Congress usually raises the debt limit before the government reaches the threshold -- Congressman Diana Black states that the limit has been raised 99 times -- but sometimes waits until after, which happened in 2003 and 2011. When that happens, the Treasury stops issuing and auctioning bonds immediately. It then finds ways to shift spending so as to maintain the normal function of the government for as long as possible.

References

• Government Accountability Office: Federal Debt Basics
• U.S. Congressman Diane Black: What Is the Debt Limit?
• The Wall Street Journal; As Debt Limit Reached, Agreement Still Far Off; Damien Paletta and Carol Lee; May 2011
• American Spectator; Debt Limit Reached; Joseph Lawler; May 2011
• Treasury Direct; Treasury Securities and Programs; Dec. 2010