The U.S. Congress voted in the first two days of August 2011 to increase the nation's $14.294 trillion debt ceiling to avoid a potential default in what was the fourth increase of the mandatory borrowing cap in President Barack Obama's first term. The legislation was known as the Budget Control Act of 2011.
Congressional leaders engaged in intense negotiations over raising the debt ceiling and reducing the federal deficit and the nation's growing debt but were bound by a deadline of Aug. 2, 2011, the date the U.S. Treasury expected the country's borrowing to hit the debt ceiling.
Obama signed the bill that very day, averting what many economists had predicted would be an economic catastrophe had the nation defaulted on its obligations.
"We've seen in the past few days that Washington has the ability to focus when there's a timer ticking down, and when there's a looming disaster," Obama said in an address to the nation. "It shouldn't take the risk of default - the risk of economic catastrophe - to get folks in this town to work together and do their jobs."
Debt Ceiling Vote
The U.S. House of Representatives approved the Budget Control Act on Aug. 1, 2011, by a vote of 269 to 161. Voting in favor of the legislation were 174 Republicans and 95 Democrats. Voting against the bill were 95 Democrats and 66 Republicans. Three House members didn't vote.
The U.S. Senate passed the Budget Control Act on Aug. 2, 2011, by a vote of 74 to 26. Voting in favor of the legislation were 45 Democrats and 28 Republicans. Voting against the bill were 19 Republicans and six Democrats.
Debt Ceiling Increases in Budget Control Act
The Budget Control Act of 2011 immediately raised the nation's debt ceiling by $400 billion, to $14.694 trillion, so the federal government could meet spending obligations previously approved by Congress.
A second debt ceiling increase allowed the statutory limit on borrowing to grow by an additional $500 billion, to $15.194 trillion, so that the government could pay its bills through February of 2012. The Budget Control Act gave Congress the authority to reject the second increase.
The legislation gave Obama the ability to seek additional increases to the debt ceiling of between $1.2 trillion and $1.5 trillion, which would boost the limit to at least $16.394 trillion and as much as $16.694 trillion. Congress would be required to approved such increases.
Debt Ceiling Increase Proposals
There were several different proposals to increase the debt ceiling before the Aug. 2, 2011, deadline.
Congressional Democrats were pushing to increase the debt ceiling by about $2.4 trillion or nearly 17 percent. The debt ceiling increase would have boosted the borrowing cap to $16.694 trillion, the highest level in U.S. history.
Also see: What is the Debt Ceiling?
Republican leaders in Congress, however, resisted that plan and instead wanted to increase the debt ceiling in two separate, and smaller, stages. Under their plan the initial debt ceiling increase would have been by about $1 trillion or 7 percent and allowed the United States to meet its obligations through the end of 2011.
Congress would then have voted on a second debt ceiling increase in January 2012, but only if there were dramatic reductions to the deficit.
Yet another plan would have raised the debt ceiling by $2.5 trillion in three installments subject to congressional approval.
Debt Ceiling Increase and Public Opinion
Public opinion polls taken during the heat of the debt ceiling negotiations found Americans deeply concerned about an increase and a preference for spending cuts.
"Despite intense lobbying of Congress by President Obama, Treasury Secretary Timothy Geithner, and others in the administration about the economic urgency for raising the nation's debt limit, fewer than one in four Americans favor the general idea of raising it," a Gallup poll taken in July 2011 found.
"Also, Americans are significantly more concerned about the budgetary risk of giving the government a new license to spend than they are about the potential economic consequences that would result from not raising the debt limit," the polling firm reported.
Debt Ceiling Deadline Moved
The Treasury Department initially forecast the government would reach the debt ceiling on May 16, 2011. But because Congress failed to increase the debt ceiling by that date the Treasury used what it called "extraordinary measures to create additional headroom" under the limit.
Those measures were limited and were expected to be exhausted on Aug. 2, 2011.
The Treasury said it moved the deadline so the United States could avoid a default on its debt, an event that has occurred in the past.
"If Congress fails to increase the debt limit, the government would have to stop, limit, or delay payments on a broad range of legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and many other commitments," the Treasury warned.
"Defaulting on those legal obligations would cause severe hardship for American families. Additionally, it would call into question the full faith and credit of the United States government - a pillar of the global financial system."
Credit rating agencies had downgraded their outlook of the nation's financial state ahead of the debt ceiling increase, saying Congress appeared unable to deal with the country's debt problems.
Previous Debt Ceiling Increases Under Obama
The debt ceiling was $11.315 trillion when the Democrat was sworn into office in January 2009 and increased by nearly $3 trillion or 26 percent by summer 2011, to $14.294 trillion.
Also see: Debt Ceiling History
Under Obama the debt ceiling increased:
- by $789 billion to $12.104 trillion in February 2009, Obama's first year in office, under the American Recovery and Reinvestment Act;
- by $290 billion to $12.394 trillion ten months later, in December 2009;
- and by $1.9 trillion to $14.294 trillion two months later, in February 2010.