In order to increase the debt limit, Republicans want to get future spending under control. Democrats want tax increases, so any deal has progresssed.
I think Republicans are still wary from 1991. George Bush (Sr) agreed to Democrats' demands that spending cuts had to come with tax increases. Then the Democrats turned around and used the tax increases as a campaign tool against him. (Bush famously said in 1988, read my lips no new taxes).
So Democrats are just trying to bait Republicans into agreeing to tax increases, so they can just use it again as a campaign tool in 2012.
If we hit our debt ceiling, the interest payments will still be made. Obama will have to decide what else to cut then, which he doesn't want to do. So many of his voters are takers (get more from the government than they pay in), so cutting anything is going to hurt his reelection. So Obama wants to goad Republicans into making a false move. It was smart of Boehner not to budge.
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