Timeline: Debt debate

Mon Jul 11, 2011 11:23am EDT

(Reuters) - President Barack Obama and top lawmakers will meet again Monday in search of a deal on slashing the U.S. budget deficit and raising the $14.3 trillion debt ceiling before the United States defaults.

Obama wants to strike a deal well before August 2, when the Treasury Department says it will no longer be able to honor its obligations and issue new bonds without breaching the limit that Congress set on how much the United States can borrow.

Republican and Democratic lawmakers say any increase must include measures to ensure the country's debt remains at a sustainable level. The debt-reduction debate is a sharp shift for Washington, which less than a year ago was focused on additional deficit spending to lower the unemployment rate.

Following is a timeline of the debate:

November 2, 2010 - Republicans win control of the House of Representatives on a promise to scale back government spending and tackle budget deficits that have hovered at their highest levels relative to the economy since World War Two.

December 1, 2010 - After nine months of talks, a bipartisan deficit reduction panel commissioned by Obama releases a report that advocates $3 trillion in spending cuts and $1 trillion in revenue increases -- mainly by closing loopholes in the tax code -- over 10 years.

January 2011 - Six Republican and Democratic senators, known as the "Gang of Six," take matters into their own hands as they begin meeting to try to strike a long-term deficit-reduction deal they can present to their parties.

February 19 - The House passes a budget for the current fiscal year that ends September 30 that would cut $61 billion from last year's levels. The Democratic-controlled Senate defeats it one month later.

April 9 - Obama and congressional leaders bring the government to the brink of a shutdown before they agree on a budget for the current fiscal year that cuts $38 billion from last year's levels. Billed as the largest domestic spending cut in U.S. history, it actually causes the government to spend $3.2 billion more in the short term.

April 13 - After Obama's initial proposal is criticized as inadequate, the president lays out a new deficit-reduction plan that would save $4 trillion over 12 years, in part by accelerating health reforms. He also proposes that Vice President Joe Biden lead bipartisan deficit-reduction talks.

April 15 - The House passes a budget that would cut spending by $6 trillion over 10 years, in part by scaling back healthcare for the elderly and the poor.

May 5 - As Biden and negotiators from both parties hold their first meeting, top Republicans say there will likely be no broad agreement on the main sticking points like tax reform and healthcare.

May 9 - House Speaker John Boehner, the top Republican in Congress, says any increase in the debt ceiling must be matched by an equal amount of spending cuts. The Treasury Department estimates it needs at least $2 trillion to cover borrowing through the November 2012 elections.

May 10 - Senate Budget Committee Chairman Kent Conrad, a Democrat, floats a plan that would rely equally on tax hikes and spending cuts to save $4 trillion over 10 years, in a bid to win the liberal support needed to bring it up for a vote. He eventually abandons the effort.

May 11 - House Republicans release a spending outline for the coming fiscal year that has its deepest cuts in education, labor and health programs cherished by Democrats.

May 16 - The United States reaches its $14.3 trillion debt limit. The Treasury Department begins tapping other sources of money to cover the government's bills.

May 17 - The "Gang of Six" talks falter as a leading conservative, Republican Senator Tom Coburn, drops out due to an impasse over healthcare.

May 24 - Democrats win an election to fill an open seat in a conservative New York district and attribute the victory to public unease with the Republican health plan.

May 25 - Senate Democrats force a vote on the Republican health plan in a bid to force Republicans to say whether they support it. Republicans still overwhelmingly back the measure but it fails in the Democratic-controlled chamber.

May 31 - The House of Representatives rejects a measure to raise the debt limit in a vote staged by Republicans to pressure Obama to agree to accompanying spending cuts. Senior Democrats decry the vote as a political stunt, although 82 Democratic lawmakers join Republicans in defeating the bill.

June 9 - In a sixth meeting of the Biden group, Treasury Secretary Timothy Geithner argues that tax increases need to be part of the equation, but Republicans remain unmoved. Obama and Boehner calling for the group to wrap up its work by July 4.

June 14 - Some 34 Senate Republicans vote to repeal tax breaks for ethanol, a sign that there may be some wiggle room in the party's no-tax-increase stance.

June 16 - After a week of talks, Biden group participants say they have tentatively agreed to a number of cuts but have not yet resolved the divide over taxes and healthcare.

June 23 - Republicans declare an impasse in the Biden talks. They complained that Democrats continued to insist on revenue increases that would never pass Congress. Democrats shoot back that any deficit-reduction package must be balanced, as they try to include tax measures focusing largely on the wealthy and corporations.

June 27 - Obama met separately with the Senate's Democratic and Republican leaders to try to figure out next steps. No agreement is reached but all parties agree to keep talking.

June 29 - The International Monetary Fund says the United States must lift its debt limit soon to avoid a "severe shock" to global markets and a still-fragile economic recovery. Obama calls for new steps to spur job growth and tax hikes on the rich, irking Republicans who remain focused on deficit cuts.

June 30 - Democratic legislators discuss a scaled-back deal that would avert default but force Congress to tackle the debt ceiling issue again before the 2012 elections. The White House rejects the idea.

July 5 - Obama invites top Democratic and Republican lawmakers to the White House to take stock of the stalled negotiations with the idea of clinching a deal by July 22.

July 6 - Reuters reports that a small team of U.S. Treasury officials are looking at options to stave off default should Congress fail to raise the limit. The Obama administration continues to say there is no contingency plan if lawmakers do not give U.S. government authority to borrow more money.

July 7 - After hosting lawmakers at White House, Obama says Republicans and Democrats still are far apart on many issues but that all agree on the need to raise the debt ceiling. Congressional leaders agree to return to the White House on July 10.

July 8 - Obama says gloomy jobs numbers in June are another reason for lawmakers to move quickly on the debt limit and suggests worries about inaction are causing businesses to suspend their hiring and investments.

July 9 - Boehner says a far-reaching $4 trillion budget deal is out of reach because Republicans will not accept the tax increases Democrats are demanding, and he focuses instead on a $2 trillion package that would rely mostly on spending cuts.

July 10 - Obama meets congressional leaders at the White House and renews push for a grand deficit reduction deal. Republicans dig in heels on no tax increase pledge and meeting ends in 75 minutes with plan to meet the next day.

(Reporting by Laura MacInnis and Andy Sullivan; Editing by Bill Trott)

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Comments (1)
GRRR wrote:
That May 31st vote in the House was a clean vote. Democrats, afraid of a political trap that would give Republicans the opportunity to label Democrats as out of control spenders, was split on the vote and it was easily defeated.

It would have been defeated even if every single Democrat voted for raising the debt ceiling.

It was a mistake — they should have voted for it. Because it was destined to fail regardless, they could have pinned the entire problem on Republicans. They could have shown that Republicans were more concerned about political gestures than solving real problems.

But Democrats were too chicken. And watch, they’ll fall for the current Republican gambit to have Democrats capitulate, only to find themselves sharing in the blame game when the cuts hit the economy.

Jul 11, 2011 3:35am EDT  --  Report as abuse
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