[13] On May 27, Biden and then-House speaker Kevin McCarthy struck a deal to increase the debt-ceiling but cap federal spending;[14] the resulting bill, the Fiscal Responsibility Act of 2023, passed the House on May 31 and the Senate on June 1.

[27] During the 21st century, it has gone up for various reasons, including tax cuts under presidents Bush and Trump, wars in Iraq and Afghanistan, entitlements like Medicare Part D, and spending in response to the Great Recession and the COVID-19 pandemic.

[29] As well, the Compromise of 1790 (when Treasury Secretary Alexander Hamilton got both Secretary of State Thomas Jefferson and Representative James Madison to agree to take on Revolutionary War debts assumed by the states and the Continental Congress in exchange for locating the capital on the Potomac River by Virginia[30]) played a role with this: Because Revolutionary War bondholders were paid 100 cents on the dollar, America made good on its debt and established good credit.

[35][36] Senate minority leader Mitch McConnell (R-KY) had said that there will be no default,[33] though he also said that dealing with the debt ceiling would be up to President Biden and Speaker McCarthy.

[46] Extraordinary measures are accounting maneuvers that the Treasury uses to enable the federal government to continue to meet its various financial obligations while there is an impasse over the debt ceiling.

[6] Secretary Yellen also initiated a "debt issuance suspension period" through June 5,[47] and has rejected the minting of a trillion-dollar coin (which would have created $1 trillion in seigniorage).

[48] Analysts were monitoring the ongoing debate over raising the debt ceiling, and were keeping investors informed of it and similarly warning about the potential consequences of a default.

[49] On the other hand, they wrote that if the debt ceiling wasn't increased as the deadline for doing so drew nearer, stock prices would start dropping and interest rates would begin to rise.

[52] In August 2011,[55] two days before the government would have defaulted,[27] there was a compromise between Democrats and Senate Republicans to create a committee to look into cutting spending,[55] and to also increase the debt ceiling.

[27] Increasing political polarization since 2011 has made votes to raise the debt ceiling more contentious than before, with economists now considering what would happen if the federal government defaulted on its loans.

This warning was based on both the difficulty the House had in electing Kevin McCarthy as Speaker, and how some lawmakers (mostly Republican) were wondering if the Treasury would be able to prioritize paying bondholders if it was breached.

[58] A number of moderate and progressive Democrats in the House and Senate had explicitly brought up the current debt ceiling fight in fundraising appeals to their supporters, and had framed it in terms of warning about potential consequences of a default.

[59] Meanwhile, Republican senator Tim Scott explicitly brought up the debt ceiling fight in his fundraising emails, though he wrote about it in terms of limiting government spending.

They included the following in their report on this:[31] While the Fourteenth Amendment, ratified in 1866, is more widely known for its provisions granting citizenship to freed slaves and establishing equal rights, it also contains a long-forgotten provision, Section 4, that states, in part, "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

With former Confederate states being admitted back into the Union at the time of the 14th amendment's ratification, many pro-Union members of Congress feared that if the South were to take back a significant amount of Congress, or were to retake the Presidency, they would refuse to pay the debt incurred by the Union during the Civil War, or pay debts incurred by the Confederacy to support its war effort against the United States.

Section 5112, was originally intended to help the Treasury make money off of coin collectors, an idea penned by Delaware's at-large representative, Republican Mike Castle.

[66][67] An idea, which first emerged just prior to the 2011 debt ceiling crisis, is that the treasury secretary could instruct the US Mint to issue a trillion-dollar coin, and deposit it with the Federal Reserve.

[70] However, according to economist Paul Krugman, the move would not be inflationary, saying on Twitter, "The Fed would surely sterilize any impact on the monetary base by selling off some of its huge portfolio of US debt.

"[71][72] Current treasury secretary Janet Yellen dismissed the plan as a "gimmick", saying that the Federal Reserve isn't required to accept the coin for deposit, and likely would not.

[8] On Wednesday, February 1, 2023, President Biden and Speaker McCarthy met for an hour in the Oval Office[75] to discuss how to raise the debt ceiling.

The two did not reach agreement – the president called for a clean debt ceiling increase, while the speaker demanded cuts to spending in exchange for raising it – though both agreed they would continue talking about it.

[81] On April 19, Speaker McCarthy unveiled the Limit, Save, Grow Act, a 320-page House bill which would have raised the debt ceiling by $1.5 trillion (enough to last until at least March 31, 2024) while at the same time providing for significant spending cuts.

More specifically, the proposals contained in the draft law included halting the partial federal student loan forgiveness program put in place by the Biden administration, introducing work requirements for Medicaid, withdrawing IRS enforcement funding for audits, and eliminating several clean energy subsidies.

[89][90] On May 17, Democratic representative Brendan Boyle introduced a discharge petition to force a vote on House Resolution 350, a special rule providing for immediate consideration of the so-called Breaking the Gridlock Act and of one amendment to the same, to be offered by the most senior ranking minority member of the Committee on Ways and Means.

[94] The bipartisan piece of legislation, endorsed by both Republican and Democratic leadership, was introduced by Patrick McHenry on May 29, 2023, to implement the agreement negotiated between Biden and McCarthy.