Timeline of Events on the Debt Limit
1917: Congress first put a limit on the amount and types of debt the Treasury Department was allowed to issue. It was initially intended to give the Treasury more flexibility, not less, to manage the nation's finances. Eventually, members of Congress realized they could use it to force tough choices in the federal budget.
1935: Social Security is implemented. Implemented as a “pay-as-you-go” system, current workers pay the taxes for current retirees. When it was first implemented, few workers lived to age 65, and those that did, did not live long past 65, so the plan did not cost much. With longer life spans, better health care and Baby Boomers retiring, the cost of Social Security is expected to rise dramatically over the next decade.
1939: The single debt ceiling that we know today is put in place.
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1965: Medicare (health insurance for the elderly) and Medicaid (health insurance for the poor) are created. The costs of Medicare would rise for the same reasons the Social Security became more expensive – more people living longer and more retirees accompanying the Baby Boom generation. Add to that the rising costs of health care and Medicare will become, by far, the biggest drain on the federal treasury over the near future, unless substantial changes are made to the program. If no changes are made, Medicare, Medicaid, Social Security, and interest on the debt are expected to eat up the entire federal budget by 2025.
1985: Americans for Tax Reform is founded by Grover Norquist. The organization will advocate for lower taxes and become well known for their no-tax pledge that members of Congress will sign, promising to not raise taxes. During the current debt ceiling debate, the question arises of whether the pledge encompasses closing tax loopholes. Norquist says that they do if they are not accompanied by reductions in the tax rates, thus making Americans for Tax Reform opposed to tax reform as part of a deal to raise the debt ceiling.
1990: President George H. W. Bush breaks his “read my lips, no new taxes” pledge.
1992: George H. W. Bush loses reelection. The lesson many Republicans will take away from that loss is never raise taxes.
2001 and 2003: Congress passes the Bush tax cuts. There are not enough votes to make them permanent, so they are set to expire in 2010.
2003: Invasion of Iraq begins. Total costs estimates for the war range from $700 billion to $3 trillion. In the same year, Congress adds a prescription drug benefit to Medicare, but decides to pay for it by borrowing more money, rather than raising taxes.
October 2008: The Great Recession begins.
February 2010: President Obama creates the National Commission on Fiscal Responsibility and Reform, which will become known as the Simpson-Bowles Commission after its leaders, Alan Simpson, a Republican, and Erskine Bowles, a Democrat. Its mission is to come up with a plan to “achieve fiscal sustainability in the long run.”
2010: Both houses of the Democratic controlled Congress fail to pass a budget for 2011. They worry that passing a budget will give Republicans an issue to run against them on in the November election and will cost them seats.
November 2010: Democrats lose seats. Republicans take control of the House and gain six Senate seats. The Tea Party Movement is given much credit for the Republican victories. Though, in Senate races in Delaware, Nevada, and Alaska, the Tea Party candidate lost. Tea Party candidates will have more influence in the House than the Senate.
December 1, 2010: The president's deficit commission, or Simpson-Bowles, issues its report. It calls for major reforms to Social Security, but leaves out reforms to Medicare or Medicaid. The report also calls for an overhaul of the tax code that would eliminate many deductions and credits while lowering overall tax rates. Obama will thank commission members for their work, but will not call on Congress to take up its recommendations.
December 17, 2010: Obama signs a two-year extension of the Bush tax cuts.
January 2011: The Senate's “Gang of Six” (three Republicans and three Democrats) begin meetings to discuss implementing the Simpson-Bowles proposal.
January 25, 2011: Obama delivers his State of the Union Address. He calls for a freeze in non-defense, non-entitlement spending and cuts in military spending. He does not address entitlement reform or tax reform.
February 14, 2011: Obama submits his 2012 budget to Congress, as he is required to do by law. The budget freezes non-military, non-entitlement spending at 2010 levels. It takes up none of the entitlement reform or tax reform ideas of the Simpson-Bowles Commission report.
April 9, 2011: Since the previous Congress did not pass a budget to fund the 2011 fiscal year, it is left up to the new Republican controlled House and Democratic controlled Senate to pass a budget. Obama and the Democrats want to keep funding at 2010 levels. Republicans are determined to get budget cuts into the current fiscal year budget. After much wrangling, they pass a plan just in time to avoid a government shutdown, which Obama signs, that cuts $38.5 billion and funds the government through the end of September. Joe Biden starts talks with a bipartisan group of Congresspersons and Senators to try and forge a compromise on deficit reduction and raising the debt ceiling.
April 13, 2011: Obama gives a speech laying out a framework for a budget and sets a goal of cutting $4 trillion over 10 years, a goal that essentially ignores his 2012 budget that was sent to Congress in February. The Congressional Budget Office would later say that they “do not score speeches,” and there is not enough detail in the speech to calculate how much money could actually be saved under Obama's plan.
April 15, 2011: The House passes a 2011 budget. It would reform Medicare and Medicaid and cut spending by $4.4 trillion over the next decade. The Senate will not take up the budget and will continue to avoid passing its own budget.
May 11, 2011: Speaker of the House John Boehner announces that House Republicans will not support any debt limit increase without at least an equal amount of spending cuts.
May 16, 2011: The U.S. hits its debt limit. Treasury Secretary Timothy Geithner begins taking steps that will allow his department to continue to pay the nation's bills. He informs Congress that he will have no more wiggle room by August 2 and the debt limit must be raised by then if the nation is to make its promised payments.
May 17, 2011: Sen. Tom Coburn (R-Okla.) leaves the “Gang of Six” talks, reportedly over the Democratic member's unwillingness to make significant cuts to Medicare.
May 31, 2011: To prove a point, House Republicans vote on a “clean” (no spending cuts) debt ceiling increase. Every Republican and 82 Democrats vote “no”.
June 23, 2011: House Majority Leader Eric Cantor (R-Va.) pulls out of the Biden negotiations citing an impasse over whether tax increases will be included in the package.
June 27, 2011: Obama meets with congressional leaders at the White House to continue debt limit negotiations.
July 2, 2011: Boehner has a private meeting with Obama at the White House. Boehner suggests that they “go big” and forge a “Grand Bargain” that would include spending cuts with entitlement reform, and tax reform that increases revenue. Obama will grab this idea and run with it. He continues to say that he wants a “big deal” after this point.
July 9, 2011: Boehner pulls out of talks with Obama on a “Grand Bargain” citing differences on the revenue increases.
July 13, 2011: Debt talks at the White House get heated. Cantor repeatedly brings up the idea of small debt limit increase. Obama tells Cantor, “Eric, don't call my bluff. Would Ronald Reagan be sitting here? This may bring my presidency down, but I will not yield on this,” then abruptly walks out.
July 15, 2011: Despite Boehner's July 9 announcement, private talks over forging a “Grand Compromise” continued. Boehner and Cantor invite White House officials to a private meeting where they offer a compromise – $3 trillion to $3.5 trillion in spending cuts with $800 billion in revenue increases through tax reform. The tax reforms would come later from a bipartisan congressional committee assigned with the task. Private talks continue over the weekend and Obama seems agreeable to the compromise.
July 18, 2011: Coburn rejoins the “Gang of Six” and they announce a plan to reduce deficits by $3.7 trillion. It includes cuts to entitlements and revenue increases from eliminating tax deductions.
July 19, 2011: The White House tells Boehner and Cantor that they want an additional $400 billion in revenue increases to more closely align the proposal with the “Gang of Six” proposal. House passes the “Cut, Cap, and Balance” bill.
July 21, 2011: Word leaks out about the private negotiations between Obama, Boehner, and Cantor. Democrats get upset with the White House for leaving them out of the negotiations. Obama reassures Democrats that there was never a deal. Boehner would later say that there was a deal in place, but Obama “moved the goal posts” after the “Gang of Six” proposal. Boehner pulls out of negotiations with the White House, saying that Obama's demand for an additional $400 billion is asking for too much.
July 22, 2011: The Senate rejects the “Cut, Cap, and Balance” bill. That evening, Obama holds a news conference where he is visibly angry at Republicans, and Boehner in particular. He complains that Boehner did not return his phone calls and that he has been “left at the altar two times now.”
July 24, 2011: Boehner appears on Fox News Sunday and announces that he has a new plan that can win bipartisan support. In a conference call to House Republicans that evening, he warns them that there will be parts of the plan that they will not like, and it is “gonna require some of you to make some sacrifices.”
July 25, 2011: Obama gives a primetime address to the nation. The speech doesn't present any new path forward. He presents the same case he has made in earlier speeches, that a “balanced approach” is needed, and asks the public to call their members of Congress. The calls and emails overload the congressional switchboard and website.
July 26, 2011: Boehner and Reid present two different plans. Obama threatens to veto the Boehner plan. Boehner says the Reid plan cannot pass the House. Reid says the Boehner plan cannot pass the Senate.
July 28, 2011: The House is set to vote on the Boehner plan. Reid is having trouble rounding up the votes for his plan in the Senate because some conservative Democrats who are up for reelection in 2012 are reluctant to vote for it.
