The federal government's statutory debt limit was reinstated on March 16, 2015, at a level that accommodated the borrowing incurred during the suspension period, which ended on March 15, 2015 ( P.L. 113-83 ). Treasury immediately began using its authority outside of its typical cash management practices to pay federal obligations to delay the date by which the debt limit would impede the federal government's ability to make timely payments on all of its obligations (through a debt issuance suspension period as well as other methods discussed in more detail later in this report). Similar actions have been taken previously. If these financing options are exhausted and Treasury is no longer able to pay for all federal obligations, some federal payments to creditors, vendors, contractors, state and local governments, beneficiaries, and other entities would be delayed or limited. This could result in significant economic and financial consequences that may have a lasting impact on federal programs and the federal government's ability to borrow in the future. This report examines the possibility of the federal government reaching its statutory debt limit and not raising it, with a particular focus on government operations. First, the report explains the nature of the federal government's debt, the processes associated with federal borrowing, and historical events that may influence prospective actions. It also includes an analysis of what could happen if the federal government may no longer issue debt, has exhausted alternative sources of cash, and, therefore, depends on incoming receipts or other sources of funds to provide any cash needed to liquidate federal obligations. A discussion of the effects that prior debt limit impasses have had on the economy is also included. Finally, this report lays out considerations for increasing the debt limit under current policy and what impact fiscal policy could have on the debt limit going forward. The gross federal debt, which represents the federal government's total outstanding debt, consists of: the debt held by the public and the debt held in government accounts, also known as intragovernmental debt. Federal government borrowing increases for two primary reasons: (1) budget deficits and (2) investments of any federal government account surpluses in Treasury securities as required by law. The debt held by the public represents the total net amount borrowed from the public to cover the federal government's accumulated budget deficits. Annual budget deficits increase the debt held by the public by requiring the federal government to borrow additional funds to fulfill its commitments. The debt held in government accounts represents the federal debt issued to certain accounts, primarily trust funds, such as those associated with Social Security, Medicare, and Unemployment Compensation. Generally, government account surpluses, which include trust fund surpluses, by law must be invested in special non-marketable federal government securities and thus are held in the form of federal debt. Treasury periodically pays interest on the special securities held in a government account. Interest payments are typically paid in the form of additional special securities issued by Treasury to the trust funds, which also increases the amount of intragovernmental debt and federal debt subject to limit. When a trust fund invests in U.S. Treasury securities, it effectively lends money to the rest of the government. The loan either reduces what the federal government must borrow from the public if the budget is in deficit, or reduces the amount of publicly held debt if the budget is in surplus. At the same time, the loan increases intragovernmental debt. The revenues exchanged for these securities then go into the General Fund of the Treasury and are indistinguishable from other cash in the General Fund. This cash may be used for any government spending purpose. Congress created a statutory debt limit in the Second Liberty Bond Act of 1917. This development changed Treasury's borrowing process and assisted Congress in its efforts to exercise its constitutional prerogatives to control the federal government's fiscal outcomes. The debt limit also imposes a form of fiscal accountability that compels Congress and the President to take deliberate action to allow further federal borrowing if necessary. Almost all of the federal government's borrowing is subject to a statutory limit. From time to time, Congress has considered and adopted legislation to change or suspend this limit. Because the statutory limit applies to debt held by the public as well as intragovernmental debt, both budget deficits and government account surpluses may contribute to the federal government reaching the existing debt limit. Treasury's standard methods for financing federal activities can be disrupted when the level of federal debt nears its legal limit. If the limit prevents Treasury from issuing new debt to manage short-term cash flows or to finance an annual deficit, the government may be unable to obtain the cash needed to pay its bills. The limit may also prevent the government from issuing new debt in order to invest the surpluses of designated government accounts, such as federal trust funds. Treasury is caught between two requirements: the law that requires Treasury to pay the government's legal obligations or invest trust fund surpluses, on one hand, and the statutory debt limit which may prevent Treasury from issuing the debt to raise cash to pay obligations or make trust fund investments, on the other. The level of federal debt changes throughout the year due to fluctuations in revenue and outlays, regardless of whether or not the government has an annual surplus or deficit. Seasonal fluctuations could still require Treasury to sell debt even if the annual level of federal debt subject to limit does not increase (i.e., if the budget were balanced and trust funds were not in surplus). Even on a day-to-day basis, the level of federal debt can vary significantly. For example, Treasury issues large volumes of individual income tax refunds in February and March, because taxpayers expecting refunds tend to file early. On the other hand, Treasury tends to collect more revenue in April because taxpayers making payments tend to file closer to April 15. Past Treasury Secretaries, when faced with a nearly binding debt ceiling, have used special strategies to handle cash and debt management responsibilities. Since 1985, these measures have included suspending sales of nonmarketable debt (savings bonds, state and local government series, and other nonmarketable debt); trimming or delaying auctions of marketable securities; under-investing or disinvesting certain government funds (Social Security, Government Securities Investment Fund of the Federal Thrift Savings Plan, the Civil Service Retirement and Disability Trust Fund, Postal Service Retiree Health Benefit Fund, Exchange Stabilization Fund); and exchanging Treasury securities for non-Treasury securities held by the Federal Financing Bank (FFB). Under current law, if the Secretary of the Treasury determines that the issuance of obligations of the United States may not be made without exceeding the debt limit, a "debt issuance suspension period" may be determined. This determination gives Treasury the authority to suspend investments in the Civil Service Retirement and Disability Trust Fund, Postal Service Retiree Health Benefit Fund, and the Government Securities Investment Fund (G-Fund) of the Federal Thrift Savings Plan. In addition, this gives Treasury the authority to prematurely redeem securities held by the Civil Service Retirement and Disability Trust Fund and Postal Service Retiree Health Benefit Fund. Debt issuance suspension periods were previously in effect from November 15, 1995, through January 15, 1997; April 4 through April 16, 2002; May 16 through June 28, 2002; February 20 through May 27, 2003; May 16 through August 2, 2011; December 31, 2012, through February 4, 2013; May 20, 2013 to October 17, 2013; and February 10, 2014, to February 15, 2014. Most recently, a debt limit suspension period began on March 16, 2015, and is still currently in effect. Treasury has yet to face a situation in which it was unable to pay its obligations as a result of reaching the debt limit. However, during debt limit impasses in 1985, 1995-1996, 2002, 2003, 2011, 2013, 2014, and 2015, Treasury took extraordinary actions to avoid reaching the debt limit and to meet the federal government's other obligations. Some of the actions Treasury took during these periods are briefly discussed below. In September 1985, the Treasury Department informed Congress that it had reached the statutory debt limit. As a result, Treasury had to take extraordinary measures to meet the government's cash requirements. Treasury used various internal transactions involving the Federal Financing Bank (FFB) and delayed public auctions of government debt. It also was unable to issue, or had to delay issuing, new short-term government securities to the Civil Service Retirement and Disability Trust Fund, the Social Security Trust Funds, and several smaller trust funds. In particular, new Treasury obligations could not be issued to the trust funds because doing so would have exceeded the debt limit. Treasury took the additional step of "disinvesting" the Civil Service Retirement and Disability Trust Fund, the Social Security Trust Funds, and several smaller trust funds by redeeming some trust fund securities earlier than usual. Premature redemption of these securities created room under the debt ceiling for Treasury to borrow sufficient cash from the public to pay other obligations, including November 1985 Social Security benefits. The debt limit was subsequently temporarily increased on November 14, 1985 ( P.L. 99-155 ) and permanently increased on December 12, 1985 ( P.L. 99-177 ) from $1,824 billion to $2,079 billion. As a result of the 1985 debt limit crisis, Congress subsequently authorized Treasury to alter its normal investment and redemption procedures for certain trust funds during a debt limit crisis. Such authority was not provided with respect to the Social Security Trust Funds. In addition, both P.L. 99-155 and P.L. 99-177 included provisions to require Treasury to restore any interest income lost to the trust funds as a result of delayed investments and early redemptions. During the debt limit crisis of 1995-1996, Treasury, once again, used nontraditional methods of financing, including some of the methods used during the 1985 crisis as well as not reinvesting some of the maturing Treasury securities held by the Exchange Stabilization Fund.