The statutory debt limit applies to almost all federal debt. The limit applies to federal debt held by the public (that is, debt held outside the federal government itself) and to federal debt held by the government's own accounts. Federal trust funds, such as Social Security, Medicare, Transportation, and Civil Service Retirement accounts, hold most of this internally held debt. The government's surpluses or deficits determine essentially all of the change in debt held by the public. The government's on-budget fiscal balance, which excludes a U.S. Postal Service net surplus or deficit and a large Social Security surplus of payroll taxes net of paid benefits, does not directly affect debt held in government accounts. Increases or decreases in debt held by government accounts result from net financial flows into accounts holding the debt, such as the Social Security Trust Fund. Legal requirements and government accounting practices also affect levels of debt held by government accounts. Since the late 1950s, the federal government increased its borrowing from the public in all years, except in FY1969 following imposition of a war surcharge and in the period FY1998-FY2001. The persistence of federal budget deficits has required the government to issue more and more debt to the public. The accumulation of Social Security and other trust funds, particularly after 1983 when recommendations of the Greenspan Commission were implemented, led to sustained growth in government-held debt subject to limit. The growth in federal debt held by the public and in intergovernmental accounts, such as trust funds, has periodically obliged Congress to raise the debt limit. Debt limit issues since the passage of the Budget Control Act of 2011 are discussed in more detail in CRS Report R43389, The Debt Limit Since 2011 , by [author name scrubbed]. Standard methods of financing federal activities or meeting government obligations used by the U.S. Department of the Treasury (Treasury) can be hobbled when federal debt nears its legal limit. The government's income and outlays vary over the course of the year, producing monthly surpluses and deficits that affect the level of debt, whether or not the government has a surplus or deficit for the entire year. Even major government trust fund accounts that usually run annual surpluses can swing back and forth between deficits and surpluses on a month-to-month basis. The ability to borrow is central to Treasury cash management systems that handle fluctuations in federal revenues and outlays. When federal debt has neared the debt limit in the past, limiting the U.S. Treasury's borrowing authority, financial management has become more complicated. If the U.S. Treasury were precluded from borrowing due to a binding debt limit in times when federal outlays outpaced revenues, the government would no longer meet all of its legal obligations in a timely manner. If the limit prevents the 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 or it may be unable to invest the surpluses of designated government accounts (federal trust funds) in federal debt as generally required by law. In either case, the Treasury is left in a bind; the law requires that the government's legal obligations be paid, but the debt limit may prevent it from issuing the debt that would allow it to do so on time. Among other consequences, a sustained inability to pay obligations on time could hinder the U.S. Treasury's ability to borrow on advantageous terms in the future. The Government Accountability Office has also concluded that delays in debt limit increases could lead to "serious negative consequences for the Treasury market and increase borrowing costs." A delay in interest payments on Treasury securities would trigger a default and risk serious negative repercussions for economies and financial markets around the world. Default might be avoided in such situations by delaying other types of federal payments and transfers. A government that delays payment of an obligation, in effect, borrows from vendors, contractors, beneficiaries, state and local governments, or employees who are not paid on time. In some cases, delaying payments incurs interest penalties under some statutes such as the Prompt Payment Act, which directs the government to pay interest penalties to contractors if it does not pay them by the required payment date, and the Internal Revenue Code, which requires the government to pay interest penalties if tax refunds are delayed beyond a certain date. Several credit ratings agencies and investment banks have expressed concerns about the consequences to the financial system and the economy if the U.S. Treasury were unable to fund federal obligations. Many economists and financial institutions have stated that if the market associated Treasury securities with default risks, the effects on global capital markets could be significant. Past Treasury Secretaries, when faced with a nearly binding debt ceiling, have used special strategies to handle cash and debt management responsibilities. Actions taken in the past include suspending sales of nonmarketable debt, postponing or downsizing marketable debt auctions, and withholding receipts that would be transferred to certain government trust funds. Congress has authorized the Treasury Secretary to invoke a "debt issuance suspension period" to use some of these strategies using the Civil Service Retirement Fund and the Thrift Savings Fund, along with the authority to make those funds whole after an easing of the debt constraint. Some U.S. Treasury responses to the credit crunch that began in mid-2007 created balance sheet items that expanded options available to the Treasury Secretary, although such options would now have minor effects on delaying when federal debt would reach its legal limit. The U.S. Treasury began selling off certain mortgage-backed securities (MBSs) acquired in late 2008. The pace of those sales was targeted at $10 billion per month in order to minimize any market disruptions in the mortgage securities market. As of March 2012, however, that Treasury portfolio of MBSs has been eliminated. Proceeds of other potential asset sales are unlikely to allow the U.S. Treasury to maintain smooth debt management operations indefinitely in the face of a continuing imbalance between federal revenues and outlays without an increase in the debt limit. U.S. Treasury contends that other types of asset sales are unlikely to provide a prudent or practical method of easing debt limit constraints. Some have suggested that the Fourteenth Amendment (Section 4), which states that "(t)he validity of the public debt of the United States ... shall not be questioned," could provide the President with authority to ignore the statutory debt limit. President Obama has rejected such claims, as have most legal analysts. More imaginative strategies to avoid debt ceiling constraints have also been proposed. The debt limit can hinder the Treasury's ability to manage the federal government's finances, as noted above. In extreme cases, when the federal debt is very near its statutory limit, the Treasury must take unusual and extraordinary measures to meet federal obligations. While the debt limit has never caused the federal government to default on its obligations, it has at times caused great inconvenience and has added uncertainty to Treasury operations. The debt limit also provides Congress with the strings to control the federal purse, allowing Congress to assert its constitutional prerogatives to control spending. The debt limit also imposes a form of fiscal accountability that compels Congress and the President to take visible action to allow further federal borrowing when the federal government spends more than it collects in revenues. In the words of one author, the debt limit "expresses a national devotion to the idea of thrift and to economical management of the fiscal affairs of the government." On the other hand, some budget experts have advocated elimination of the debt limit, arguing that other controls provided by the modern congressional budget process established in 1974 have superseded the debt limit, and that the limit does little to alter spending and revenue policies that determine the size of the federal deficit. The Obama Administration has proposed allowing increases in the debt limit subject to congressional disapproval. While the budget process provides Congress with one means of controlling federal spending, the debt limit may provide a different sort of leverage that is not redundant. Congress ordinarily delegates work to its committees. The Committees on Appropriations have special responsibilities regarding discretionary spending, and authorizing committees are generally responsible for mandatory program spending decisions, while Committees on the Budget are tasked with drafting an overall budgetary framework that specifies aggregate levels for federal spending and taxation. While those committees often incorporate views of other committees and Members, measures involving the debt limit often provide individual Members not belonging to those committees with a separate instrument to influence federal fiscal policy. Congress has always placed restrictions on federal debt. Limitations on federal debt have helped Congress assert its constitutional powers of the purse, of taxation, and of the initiation of war. Between World War I and World War II the form of statutory restrictions on federal debt evolved into an aggregate limit that applied to nearly all federal debt outstanding. Before World War I, Congress often authorized borrowing for specified purposes, such as the construction of the Panama Canal. Congress also often specified which types of financial instruments Treasury could employ, and specified or limited interest rates, maturities, and details of when bonds could be redeemed. In other cases, especially in time of war, Congress provided the Treasury with discretion, subject to broad limits, to choose debt instruments. Some opponents raised concerns that granting the Treasury Secretary authority to issue debt could affect monetary policies, which might tighten credit conditions. Proponents contended that federal borrowing would not disrupt settlements on such monetary issues reached in 1878 and 1890. Such concerns became moot after the establishment of the Federal Reserve System in 1913. For example, the War Revenue Act of 1898 allowed Treasury to use certificates of indebtedness, which had maturities of a year or less, and were used for short-term borrowing and cash management, as well as long-term bonds. For example, the 1898 War Revenue Act (30 Stat. 448-470) that funded Spanish-American War costs granted the Treasury Secretary the authority to have $100 million outstanding in certificates of indebtedness with maturities under a year, which were mainly sold to large investors, banks, and other financial institutions.