Changes

The tax cut legislation enacted in 2002 and 2003 was subject to "pay as you go" Congressional rules that required the cuts to be scored by the Congressional Budget Office over a ten year period.  As a result, the legislation provided for only temporary tax cuts that were scheduled to expire at the end of 2010.  In a budget compromise, the Republican members of the House of Representatives and President Obama agreed to extend the cuts until the end of 2012 in exchange for extending unemployment insurance benefits.

The tax cut legislation enacted in 2002 and 2003 was subject to "pay as you go" Congressional rules that required the cuts to be scored by the Congressional Budget Office over a ten year period.  As a result, the legislation provided for only temporary tax cuts that were scheduled to expire at the end of 2010.  In a budget compromise, the Republican members of the House of Representatives and President Obama agreed to extend the cuts until the end of 2012 in exchange for extending unemployment insurance benefits.

During the summer of 2011, House Republicans refused to increase the [[debt ceiling|ceiling on the total federal borrowing authority]].  Although Congress had passed [[appropriation]]s on the assumption that additional money would be borrowed to meet deficit spending levels, without a higher ceiling, the U.S. Treasury could not borrow the money to pay what the federal government owed to vendors, suppliers, employees or beneficiaries.  The United States would default on its debts and be forced to shut down.  A compromised (called the [[Budget Control Act of 2011]])  was reached that raised the debt ceiling in exchange for the creation of a "Supercommittee" that would find spending cuts to take effect in 2013, with other spending cuts going into effect immediately.  If the Supercommittee could not reach an agreement or if Congress rejected their recommendations, then automatic across-the-board cuts to both defense and domestic spending would take place.  The law was drafted to make the automatic cuts so undesirable that Congress would be forced to work out a deficit reduction agreement.  However, the Supercommittee failed to agree and both Republicans and Democrats decided in 2011 to leave the spending cut question for additional legislation in 2012.  If a new law is not passed before December 31, 2012, then automatic spending cuts under the existing law will apply to almost all federal programs in 2013.  

During the summer of 2011, House Republicans refused to authorize any new spending allocations without meaningful reform to existing programs and tax reform measures. The president had asked for an increase the [[debt ceiling|ceiling on the total federal borrowing authority]].  Without a higher ceiling, the U.S. Treasury could not borrow the money to pay what the federal government owed to Social Security recipients, vendors, suppliers, employees and others.  The United States would default on its debts and be forced to shut down.  A compromised (called the [[Budget Control Act of 2011]])  was reached that raised the debt ceiling in exchange for the creation of a "Supercommittee" that would find spending cuts to take effect in 2013, with other spending cuts going into effect immediately.  If the Supercommittee could not reach an agreement or if Congress rejected their recommendations, then automatic across-the-board cuts to both national security and entitlement spending would take place.  The law was drafted to make the automatic cuts so undesirable that Congress would be forced to work out a deficit reduction agreement.  However, the Supercommittee failed to agree and both Republicans and Democrats decided in 2011 to leave the spending cut question for additional legislation in 2012.  If a new law were not passed before December 31, 2012, then automatic spending cuts under the existing law would apply to almost all federal programs in 2013. At the last moment, the cuts were "kicked down the road" 60 days to the next Congress, Bush-era tax rates were made permanent, and the top marginal rate returned to the Clinton-era rate.

Although the 2011 agreement raised the federal borrowing ceiling, the federal debt has continued to grow and the new ceiling is expected to be reached in early 2013.

Although the 2011 agreement raised the federal borrowing ceiling, the federal debt has continued to grow and the new ceiling is expected to be reached in early 2013.