1 How did we get to this point? Raising the debt ceiling is one of those peculiar features of the U.S. political system. Every so often (89 times since 1939) Congress has voted to raise the debt limit, even though it already voted for the spending obligations that brought the country to the edge of its borrowing power. Usually, the vote is a formality, but not this year. Congressional Republicans see raising the $14.3 trillion limit as a Rubicon to be crossed only if Obama tosses billions in spending overboard. And they have refused to pair those cuts with higher tax revenues to help right the fiscal ship.
5 things to know about status of talks
July 16, 2011 at 11:13PM
2 What are the options on the table? Three main paths have emerged. A bipartisan group outlined a deal to save more than $2 trillion over the next decade that would cut farm subsidies, federal pensions and the $100 billion from Medicaid. President Obama wants a bigger deal -- a "grand bargain" that would save $4 trillion over the next decade. The third option is a fallback proposed by Senate Republican leader Mitch McConnell that would allow Obama to raise the debt limit in three increments totaling $2.5 trillion, but would give Republicans a chance to vote against raising the limit.
3 What's the motive for a "grand bargain"? Perhaps the biggest surprise has been Obama's quest for a historic debt-reduction deal. It would involve unpopular cuts in Social Security and Medicare and smaller tax increases on the wealthy than if Obama simply let the Bush tax cuts expire at the end of 2012. And it could impede the economic recovery by ratcheting back government spending, thus reducing demand. But as Obama sees it, the crisis has offered an opportunity to fulfill his ambitious campaign promise to get serious about attacking the nation's fundamental problems.
4 Who is calling the shots on the Republican side? That's unclear. Speaker John Boehner, the chain-smoking veteran, seemed genuinely interested in striking a historic deal. But standing in the way has been the House's No. 2 Republican, Eric Cantor, who has turned himself into the tribune for the House's conservative freshman class and has rejected Boehner's epochal deal. This leaves Sen. Mitch McConnell, the legislative tactician, who has been the proud enforcer of GOP intransigence against Obama but who has decided that holding fast now could lead to disaster.
5 Where does the GOP's anti-tax resistance come from? The Republican priority is less about closing the deficit per se than shrinking government and, above all, cutting taxes. This focus has been decades in the making. The Reagan Revolution was spurred by "supply side" animus, but he presided over several tax increases. But when George H.W. Bush signed a deficit deal with higher taxes, he was cast as a traitor. George W. Bush passed two big tax cuts, which nonpartisan budget experts now say were a major factor in today's deficits. But conservatives have maintained that those tax cuts increased revenue.
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