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U.S. Debt Ceiling Debate
UPDATED: August 17, 2011
U.S. Debt Limit Fight

On August 5, the global credit rating appraiser Standard & Poor's (S&P) for the first time in its history downgraded the U.S. Government's credit rating to AA+ from AAA after the U.S. market closed, sending a shiver through global financial markets.

The agency said there's one-in-three chance that the rating could be downgraded a further notch if conditions worsen over the next six to 24 months.

The following are the key facts about the U.S. debt limit fight:

On January 6, Treasury Secretary Timothy Geithner urged Congress to raise the nation's public debt limit, saying that failure to do so would affect the nation's job creation efforts and U.S. firms' ability to borrow.

He noted in a letter to congressional leaders that the U.S. Government would reach the debt ceiling of $14.29 trillion as early as in March.

On April 13, President Barack Obama proposed a bipartisan group led by Vice President Joe Biden to begin negotiations in May on cutting the deficit and lifting the borrowing limit.

However, it was hard for Democrats and the Republicans to reach a consensus as the two parties quarreled bitterly over questions like whether to allow tax hikes and whether to accept a short-term solution.

On May 16, the United States hit the statutory debt limit.

In that month, the Treasury Department started "unconventional" measures to curb investment activities that would otherwise force it over the limit, including a debt issuance suspension period that began on May 16 and lasted until August 2, when the Treasury Department projected that the borrowing authority of the United States would be exhausted.

On June 27, Obama met with Senate leaders to try to talk about the swollen national debt.

Since then, the president had met with the two political parties' leaders in Congress many times yet with little effect.

On July 25, Republicans and the Democrats each unveiled their plans to lift the debt ceiling.

While Republicans insisted on a two-stage deficit reduction plan, which meant that the Obama administration would face negotiations before the 2012 elections, the Democrats' plan was comparatively more beneficial for the White House.

On July 29, the U.S. House of Representatives voted on the Republicans' plan.

Although the plan was passed by the House with a narrow margin, it was vetoed by the Senate on the same day.

On July 30, the Republican-controlled House killed the Democrats' plan.

On July 31, after long and hard negotiations, a bipartisan debt ceiling deal was finally reached. This deal would lift the federal debt limit in two stages by at least $2.1 trillion, enough for the White House to tide over the 2012 elections, a stance the Obama administration strongly supported. Also, the government would cut the deficit by $2 trillion in the next ten years without raising additional taxes, according to the deal.

On August 1, the U.S. House of Representatives okayed the last-ditch bill. Later on August 2, the Senate also gave the green light to the bill before the deadline of a government default.

(Source: Xinhua)

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