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Why does the debt fluctuate?

Similar to a business, the Federal Government's receipts and income fluctuate. Therefore, there are times when the Federal Government has more cash coming in than it needs to meet its obligations. During these times, the Federal Government invests some of this money and also does not need to do new borrowing to meet its obligations.

Incoming revenue rises when individuals and businesses file and pay their federal taxes. When the rise in revenue exceeds what is needed to pay obligations, Treasury can pay down its debt by redeeming more securities than it issues.

The Total Public Debt Outstanding reflects receipts and outlays. If Treasury projects an increase in outlays, it issues more Treasury securities to meet its obligations, resulting in a rise in the debt. If the Treasury realizes a rise in receipts (such as taxes or other revenue), it may redeem Treasury securities and the debt may decrease.

For a full discussion of this subject, see Recent Innovations in Treasury Cash Management in the New York Federal Reserve Bank's Current Issues in Economics and Finance.

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