How We Got Here: A (Very) Brief History of Recent Fiscal Negotiations
Here's how we got to the present shutdown/debt ceiling impasse. Keep in mind that the Senate failed to pass a budget throughout this period, and the president was content to govern from crisis to crisis.
April 2011, continuing resolution--Democrats talk up a shutdown, accusing the new Tea Party-backed majority of wanting one. Several small continuing resolutions pass, to keep talks going. A deal is reached in April 2011 for a new budget, and Republicans claim they won small spending cuts. But actual spending is higher--the cuts were to additional spending--and the White House boasts of having offered meaningless concessions.
July-August 2011, debt ceiling--President Barack Obama insists on tax hikes, including the expiration of the Bush tax cuts; House Republicans want a commitment to spending cuts. Conservatives present a "cut, cap, and balance" plan that passes the House but dies in the Senate. As President Obama and House Speaker John Boehner reach a "grand bargain," including new revenues, Obama kills it by asking for higher taxes. The eventual deal, the Budget Control Act, gives the parties until the end of the year to reach a bigger deal, or else the "sequester" kicks in--roughly 2% cuts to discretionary spending to hurt Democrats politically, cuts to defense to bother Republicans. Democrats are frustrated that the president appeared soft on the Tea Party's alleged "terrorist" tactics; Conservatives are frustrated at the composition of the deal and the emphasis on defense cuts. The nation's credit is downgraded.
Fiscal cliff, December 2012--After the parties fail to reach a deal by the end of 2011, the sequester began--but did not take effect until January 1, 2013. Coincidentally, that was also the expiration date for the Bush tax cuts, which had been extended, as well as the payroll tax holiday, creating a "fiscal cliff" of new taxes that would have caused real damage to the U.S. economy, Republicans, having lost the November election but retained control of the House, were on the back foot throughout. Speaker Boehner tried to negotiate with President Obama, but his plans were rejected by his caucus, whose conservative members were upset at having to accept any tax increase at all. In the end, in the early hours of Jan. 1, the House supported a deal that was crafted in the Senate and that preserved the Bush tax cuts for all but the top earners, while delaying the sequester for an additional two months to create space for another deal. Discontent continued to rumble in Republican ranks and nearly toppled Boehner--while Democrats seethed at their paltry gains.
Sequester, February/March 2013--President Obama attempted to talk up the effects of the sequester on the economy, but Republicans, chastened by past negotiations, refused to budge and came around to the view that the sequester was better than an unfavorable deal. President Obama, not expecting that response, was caught flat-footed--and the predicted parade of horribles failed to materialize. Spending was trimmed and the deficit began to fall. Meanwhile, brief continuing resolutions for the budget and small extensions of the debt ceiling were passed (again in May), setting the stage for a confrontation in the fall of 2013.
Shutdown/debt ceiling, September/October 2013--Republican leaders prepared for a showdown on the debt ceiling, having passed the Full Faith and Credit Act in the House of Representatives in May, which would prevent the government from defaulting on its debt even after the debt ceiling had been reached. Yet conservatives forced an earlier confrontation by insisting on defunding or delays to Obamacare's implementation as a condition of funding the government through yet another continuing resolution. The Senate refused to agree, as did the President, creating a government shutdown that extended into the debt ceiling debate.