Taming
the
National Debt
To
the Wire on Default
The "Great" Debt Limit Debate
of 2011
After Congress and the Administration successfully avoided a government
shutdown in April 2011, Act
Two quickly started. The
debate revolved around the question of whether to raise the debt limit
and, if so, what spending cuts Congress could and should extract as
part of a deal (
+).
The
Department
of
the
Treasury
and
the
Administration
set
out
a
position
that
"failing to increase the debt limit would have catastrophic economic
consequences." According to Treasury, "Since 1960, Congress has
acted 78 separate times to permanently raise, temporarily extend, or
revise the definition of the debt limit." The debt ceiling stood
at
$14.294 trillion. On May 2, and reaffirmed on July 1, Treasury
forecast
that if Congress did not act to raise the limit, default would occur on
August 2, 2011. (Ironically in 2006, then Senator Obama had voted
against raising the debt ceiling, a fact which Republicans enjoyed
pointing out). Tea Party activists pushed
House Republicans
to use the debt limit vote to force spending cuts (
1,
2). Meetings at the White
House
yielded no progress and August 2 loomed ever closer. Despite the
Administration's dire predictions, the
debate
headed
to
the
wire.
A debate of this magnitude and intensity could not help but get caught
up in
presidential politics. Many of the presidential candidates
signed on to the
"cut,
cap and balance pledge" advanced by conservatives. Some of
the GOP presidential candidates
were more
vocal on the debt limit debate than others. Ron Paul (
"Conviction") and Michele Bachmann
(
"Courage") even ran ads on
the
subject. By contrast Mitt Romney generally kept quiet on the
matter.
Finally, on July 31, 2011 President Obama
announced an agreement had
been reached to raise the debt ceiling and avoid default. In
addition to raising the debt limit so that the matter need not be
considered again until 2013, the agreement calls for "10-year
discretionary
spending
caps
generating
nearly
$1
trillion in deficit reduction," and, perhaps most significantly, it
creates a
bipartisan committee which will identify $1.5 trillion in deficit
reduction; Congress must vote on the committee's recommendations by
December 23, 2011.
On August 1 the House voted to pass the agreement by
269-161 (Republicans 174-66 and Democrats 95-95). The next day
the Senate passed it by a 74-26 vote and President Obama signed it into
law.
Key Dates
May 5 - Vice President Joe Biden
heads bipartisan talks starting with a meeting at Blair House.
May 9 - In a
speech, Speaker John
Boehner draws a line, stating, "Without
significant spending cuts
and reforms to reduce our debt, there will be no debt limit
increase.
And the cuts should be greater than the accompanying increase in debt
authority the president is given
June 23 - The
Biden talks reach an
impasse, and the
matter is kicked upstairs to the President.
July 13
- Moody's
Investors Service announces it has "placed the Aaa
bond rating of the government of the United States on review for
possible downgrade given the rising possibility that the statutory debt
limit will not be raised on a timely basis, leading to a default on US
Treasury debt obligations" (
+).
July 19 - House passes a
"Cut, Cap
and Balance"
bill
favored by conservatives, but seen as having no chance of advancing
further.
At this point, "The Gang of Six" bipartisan
group of
Senators weighed in with "back to black" proposal which seemed to offer
some promise.
July 22 - Negotiations between President Obama and
Speaker Boehner on
debt ceiling broke down. [
letter,
transcript]
July 25 - President Obama and Speaker Boehner
delivered dueling speeches
on debt ceiling. [
Obama,
Boehner,
reactions]
July 29 -
House passes the Budget Control Act of 2011, which included a
balanced budget amendment. [
statements and reactions]
July 31 - President Obama announces
agreement had been reached to avoid default. [
statement and reactions]
Aug. 1 - House votes to pass the agreement by
269-161 (Republicans 174-66 and Democrats 95-95).
Aug. 2 - Senate passed debt ceiling agreement by 74-26 and President
Obama signs, averting default.