Timeline: The debt debate

Wed Jul 13, 2011 11:50pm EDT

(Reuters) - President Barack Obama and top lawmakers will meet again on Wednesday in an effort to forge a budget deal that would clear the way for Congress to raise the $14.3 trillion debt ceiling.

Obama wants to strike a deal well before August 2, when the Treasury Department says it will not have enough money to cover debt service, military salaries and other obligations.

Following is a timeline of the debt 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, which 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. He proposes that Vice President Joe Biden lead 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 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 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 23 - Republicans declare an impasse in the Biden talks, saying that Democrats are insisting on roughly $400 billion in new revenue by closing tax breaks for the wealthy and certain business sectors.

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 3 - Obama and Boehner meet quietly at the White House to discuss a more ambitious "grand bargain" that would save roughly $4 trillion over 10 years through an overhaul of the tax code and changes to popular benefit programs.

July 5 - Obama invites top lawmakers to the White House to restart negotiations and clinch 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 in place.

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.

July 8 - A dismal jobs report focuses new attention on the sputtering economy. Obama says uncertainty about the debt ceiling talks is hurting economic expansion.

July 9 - Boehner says a "grand bargain" is out of reach because Republicans will not accept the tax increases Democrats are demanding, and he calls for a more modest $2 trillion package that would rely mostly on spending cuts.

July 10 - During a testy, brief meeting at the White House, Obama and congressional leaders agree on little more than the need to meet again the following day.

July 11 - The follow-up meeting breaks little new ground, but Obama pressures both Democrats and Republicans to make concessions that would clear the way for a deal. Another meeting is planned for July 12.

July 12 - Senate Republican leader Mitch McConnell offered a backup plan for raising the debt limit that would allow the deficit-reduction effort to be shelved. Obama warned that if the debt-limit impasse is not resolved soon, government benefits for older Americans might be at risk.

(Reporting by Andy Sullivan and Caren Bohan; Editing by Bill Trott)

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