It's been two months since the federal government technically hit its $14.3-trillion debt limit, but there's still no agreement on a deal even as the deadline draws near. Here's a rundown of what's happened recently and what’s being discussed at the negotiating table right now. (For the basics of the debate, check our earlier explainer.)
Initially, the White House and some Democrats had pushed for a “clean” vote—that is, a vote on raising the debt ceiling that didn't tie in other measures or conditions. They’ve given that up. In late May, 82 House Democrats joined their Republican colleagues in rejecting a clean vote to raise the ceiling.
With the clean vote ruled out, negotiations over the debt ceiling and reducing the deficit have gotten messy. The Treasury Department has said it will need the debt ceiling raised by more than $2 trillion to get through the 2012 elections.
That figure is essentially being used now as the baseline for the spending cuts being discussed by lawmakers pushing their various demands. (Rep. Michele Bachmann, a Republican presidential contender, has continued to insist that she’ll vote for a debt ceiling increase only if it’s tied to a repeal of the health care overhaul.)
However complex the current debate may sound, at heart it is a very simple concept: A deficit can be tackled in only two ways—by spending less or by taking in more revenue.
President Obama has pushed for both, in the form of a more ambitious, long-term agreement that would reduce the deficit by $4 trillion over 10 years. He’s reportedly offered to raise the eligibility age for Medicare in order to win some concessions from Republican negotiators, who’ve opposed any deal that would include tax increases.
So far, that hasn’t seemed to sway them. Rep. Eric Cantor, a Virginia Republican and House Majority leader, has held a hard line on rejecting tax increases: “We don’t accept that you raise taxes in an economy like this,” he said recently. In June, negotiations led by Vice President Joe Biden fell apart after Cantor walked out.
But as Time magazine notes, Cantor hasn’t always attached so many demands to raising the debt ceiling. He voted in favor of it repeatedly during the Bush presidency without any insistence on spending cuts, and he wasn’t alone. In fact, Rep. Cantor and Speaker of the House Rep. John Boehner voted to raise the debt ceiling five times—by more than $3.7 trillion in all—during the Bush presidency, according to the liberal outlet Think Progress.
But politics on the issue cuts both ways. As we noted, then-Sen. Obama voted in 2006 against raising the debt limit. A White House spokesman has said the president now “thinks it was a mistake” to vote against the measure.
Meanwhile, the deadline looms just three weeks away. The Treasury Department said in May that creative maneuvering can only avert a default until August 2—at which point the United States will begin to default on some of its debts, potentially lowering the nation's credit rating and making borrowing more expensive in the long run. President Obama has said he won’t accept a short-term deal to put off the debate by 30 to 90 days.
Though a full default has never happened before, the Washington Post notes that late payments of U.S. debts back in 1979 resulted in increased interest rates and even some investor lawsuits filed against the government.
Still, a handful of Republican lawmakers believe that fears of a default are greatly exaggerated. Dubbed the “default deniers,” some have accused the administration of using scare tactics over the debt ceiling.