3
PRESIDENT OBAMA CAME INTO
confl ict with the Republican
majority in the House of
Representatives over many
issues, including the federal
debt. In 2011, Obama and House
Speaker John Boehner met
on numerous occasions, but
reaching a compromise on the
debt limit and other issues
proved diffi cult. Why?I
N SUMMER 2011, CONGRESSIONAL REPUBLICANS CAME INTO sharp confl ict
with President Obama and congressional Democrats over raising the federal
government’s debt limit. Each side argued that it could not accept the plan
proposed by the other side, even if the delay in fi nding a solution risked harming
the economy. The debate arose because the federal government’s expenditures
currently exceed the revenues it collects through taxes and other sources. So
the Treasury Department must issue bonds to fund operations. This essentially
involves borrowing money from the bondholders, who must eventually be
repaid, with interest. However, the total amount of federal borrowing is limited
by law, so when Congress authorizes spending that requires more borrowing, it
must also enact legislation to raise the debt limit.
In 2011, after Congress passed a spending budget that would require an
increase in the debt limit, congressional Republicans announced they would
not support the increase without signifi cant spending reductions. Many
opponents of the increase had been elected in 2010 with the support of “Tea
Party” groups, who wanted to reduce federal spending. President Obama
and congressional Democrats argued that funding the government’s current
activities and upholding its obligations was necessary, even if that meant
borrowing more money. Negotiations spanned several months, as the date
approached when the debt limit would be reached and the government
would have to either refuse to repay bonds that came due or make drastic
spending cuts.