WALL STREET JOURNAL, ANNIE LINSKEY AND SIOBHAN HUGHES

During the final throes of negotiations to avoid a government default in 2011, then-Vice President Joe Biden and President Barack Obama received late-night updates in the Oval Office on a compromise to break a legislative logjam as they monitored the Asian markets for reaction to signs that the U.S. couldn’t pay its bills.

“I cannot tell you how terrifying that was,” said Jack Lew, who was the director of the Office of Management and Budget at the time, recalling how he and others finally hammered out a budget deal with Republicans that led to spending cuts in exchange for raising the debt ceiling. “I don’t think I’ve worked on a domestic policy issue where there was as imminent a sense of potential catastrophe,” said Mr. Lew, who later served as Treasury secretary.

With the country facing another debt-ceiling deadline this summer, the 2011 showdown has become instructive. But Democrats and Republicans say they took sharply different lessons from it.

Now-President Biden’s team points to the near-default as a reason they say they won’t entertain negotiations tied to the debt ceiling again, with Mr. Biden reiterating this week that he wants a “clean” increase with no conditions attached.

Republicans say the resolution of the 2011 standoff underscores how the debt ceiling is an obvious place for the GOP to exert leverage this time around to force spending cuts to narrow the federal deficit. While they haven’t laid out a plan, Republicans say Social Security and Medicare are off the table but are expected to seek deep spending reductions elsewhere.

“Debt-limit debates have been used for nearly every successful attempt to reform federal spending in living history,” said House Speaker Kevin McCarthy (R., Calif.) in a recent speech. “Why? Because the problem only gets solved when both parties come to the table.”

The country bumped up against its $31.4 trillion borrowing limit in mid-January, prompting the Treasury Department to start using “extraordinary measures” to pay America’s bills. The measures could be exhausted as soon as July, the Congressional Budget Office estimated Wednesday, setting a rough deadline for the White House and the new Republican-controlled House to grapple with the issue.

Most economists say that it would be catastrophic for the economy if Mr. Biden and Congress fail to lift the debt ceiling in time, causing the U.S. to default on debt payments and other obligations such as government paychecks and Social Security benefits.

“There’s going to have to be a deal,” said Greg Valliere, the chief U.S. policy strategist at AGF Investments, a Toronto-based asset-management firm. “Unfortunately, the catalyst could be a very volatile financial market if we don’t have a deal.”

Mr. Biden views the current circumstances as more dangerous than in 2011, a White House official said. The official said that Republicans haven’t made clear what they would want in the talks.

Mr. Biden has said he is open to what he calls separate talks about deficit reduction. During his State of the Union address, Mr. Biden said his budget, to be released next month, will erase $2 trillion in deficits over the next decade without reducing Social Security or Medicare benefits or raising taxes on those making less than $400,000 a year. He hasn’t provided more details, but in speeches has floated the idea of raising additional money from higher-income Americans and businesses.

Mr. Biden and Mr. McCarthy met recently in what the White House described as “a frank and straightforward dialogue” and Mr. McCarthy called “a good conversation.” Democrats insist they aren’t negotiating on the debt ceiling, while Republicans say the two lanes are part of the same discussion.

The two plan to continue talking. “Speaker McCarthy looks forward to his next discussion with the president on lifting the debt ceiling in a responsible way,” Mark Bednar, a spokesman for the speaker, said in a statement. Mr. Biden told reporters Tuesday: “I suggest that instead of making threats about the debt ceiling, which would be catastrophic, let’s just lay out our budgets.”

Republicans plan to release their own budget by mid-April.

Congressional Democrats recognize that the debt-ceiling bill gives Republicans their strongest form of leverage to win spending cuts. That is causing some Democratic caucus members to worry that Mr. Biden won’t hold firm on his pledge to not negotiate on the debt ceiling.

“Of course that is a major concern,” said Rep. Alexandria Ocasio-Cortez (D., N.Y.) about whether Mr. Biden would give away too much in negotiations. “We will be doing everything that we can to really advocate at the White House to hold the line.”

Republicans see it differently. “The president knows that he himself has a history of negotiating in connection with the debt ceiling,” Senate Minority Leader Mitch McConnell (R., Ky.) said on Fox News earlier this month. “So, I think what the speaker is asking him to do is not unreasonable and certainly within precedent.”

In the 2011 discussions, Mr. Biden led bipartisan talks on a debt-ceiling increase and paved the way for lifting the borrowing limit by $2.4 trillion paired with $917 billion in federal spending cuts and a new committee tasked with further deficit reductions.

Passage was a nail-biter: the GOP-led House repeatedly had to pull a debt-ceiling bill off the floor because of a lack of Republican votes. As markets sank, Treasury officials debated steps such as giving priority to which bills to pay. And even after the deal was signed, debt-rating service Standard & Poor’s downgraded long term U.S. debt for the first time in seven decades.

“We both learned the lessons from 2011, which is the United States has to pay its bills on time, and we don’t negotiate over whether or not we maintain our full faith and credit,” said Sen. Chris Van Hollen (D., Md.), who was part of the group led by Mr. Biden.

Some Democrats and left-leaning economists decry the 2011 deal, saying the spending cuts slowed the economy’s recovery from the 2007-09 recession.

“Hitting the debt ceiling is terrible, and making a deal that hamstrings our economy is also terrible,” said Heidi Shierholz, the president of the Economic Policy Institute, a liberal think tank.

This time around, some lawmakers view the distinction the White House is making between the two sets of talks as merely semantic, believing the discussions around spending cuts and the debt ceiling will inevitably merge.

Sen. Joe Manchin (D., W.Va.) has indicated he is open to attaching spending cuts to a debt-ceiling increase. “We have to negotiate,” Mr. Manchin said in a January interview with CNN where he also called the White House policy of not negotiating with Republicans a mistake.

“I’m glad conversations are happening between the White House and Speaker McCarthy,” said Rep. Abigail Spanberger (D., Va.) during a recent event in her district. “But they need to move more quickly because the closer we approach a possible default, the more damage to our local economy.”

Democrats have also used the borrowing limit for leverage. During the Republican administration of former President Donald Trump, Democrats used debt ceiling negotiations in 2017 as part of a push for more domestic spending.

When pressed on the 2017 talks, Senate Majority Leader Chuck Schumer (D., N.Y.) defended the Democrats’ record. “In one instance, did we do a budget proposal alongside a debt-ceiling proposal? Yes, but there was no brinkmanship,” he told ABC News.

Republicans have a narrow House majority. Mr. McCarthy, who only won the leadership after 15 rounds of votes that required concessions to far-right members, is keeping moderate Democrats close. He has already met with Mr. Manchin, and he was seen earlier this month dining out with Sen. Kyrsten Sinema (I., Ariz.), who caucuses with the Democrats and hasn’t said whether she believes there should be negotiations over the debt ceiling.

“She’s a friend,” Mr. McCarthy said in a brief interview.

For many members of Congress, the lessons of 2011 aren’t as visceral as they are for the Republican and Democratic leaders. Roughly three-quarters of current House lawmakers weren’t in office during the 2011 debt-ceiling fight. And just 53 members of the 222-member House Republican majority were in office during those negotiations.