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Obama, GOP leaders said to discuss new debt plan

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President Obama and House Republican leaders are deep in negotiations over a far-reaching plan to save $3 trillion over the next decade through sharp cuts in agency spending and politically painful changes to popular health and retirement programs, congressional leaders have been told, but there were conflicting accounts on whether the deal would include any immediate increase in taxes.

White House spokesman Jay Carney and House Speaker John A. Boehner (R-Ohio) quickly issued statements saying the two sides are not close to any agreement. Aides to House Majority Leader Eric Cantor (R-Va.) and Senate Minority Leader Mitch McConnell (R-Ky.) also said they were unaware of an imminent deal.

However, congressional Democrats were in a high state of alarm about talks they said were now leading toward a broad deficit-reduction deal that would not immediately include increased revenue. They said this would violate their pledge not to cut benefits for Social Security and Medicare recipients and require them to swallow a deficit-reduction plan that relies solely on spending cuts without raising taxes. Democrats, including Obama, have repeatedly pledged to pursue a deal that contains a “balance” of both spending cuts and revenue increases.

According to another account, the issue of whether Bush-era tax cuts for wealthy Americans will be allowed to expire remains unresolved, as is the question of how much revenue should be raised through tax reform.

Administration officials revealed the substance of the talks to congressional leaders late Wednesday, after Obama met at the White House with Boehner and Cantor, congressional aides said, speaking on the condition of anonymity to detail private discussions. The White House acknowledged that the proposed deal is “to the right of the Gang of Six” and far removed from what Democrats have said would be acceptable.

The White House is seeking a trigger that would allow the Bush-era tax cuts to expire for the nation’s wealthiest households. Boehner has proposed repealing provisions of Obama’s health care law, including the requirement that all individuals purchase health insurance after 2014.

Thursday’s talks revive the “grand bargain” that had been the focus of negotiations between Boehner and Obama earlier this month but that blew up after House Republicans objected to higher taxes. According to congressional sources, Obama has apparently offered to forgo any tax increases in the initial deal, postponing an overhaul of the tax code until next year.

That was also the shape of the old deal, but with one significant exception: Obama had been pressing Republicans to extend the Bush-era tax cuts for middle-class households now, allowing the cuts that benefit the wealthiest households to expire next year. With that part of the bargain now off the table, the aides said, Democrats see no guarantee that Republicans will actually follow through with tax reform in the future.

Senate Democratic leaders warned the Republican-controlled House, meanwhile, that time is running out for a comprehensive deal that would include raising the federal debt limit. They urged the House to remain in session and to ignore “extreme right-wing ideologues” who reject compromise.

In a floor speech a day after the White House signaled that Obama would accept a short-term hike in the debt ceiling if it gave lawmakers time to finalize a comprehensive deal, Senate Majority Leader Harry M. Reid (D-Nev.) condemned the House GOP leadership for reversing course on a plan to remain in session through the weekend and instead take Saturday and Sunday off.

Reid said it would present a “a very bad picture” if House members leave town this weekend without a deal. He noted that under congressional rules, a bill that involves revenues would have to start in the House, meaning that a “grand bargain” like the one sought by Obama and Boehner could not begin moving through Congress until next week.

In separate floor remarks, Sen. Charles E. Schumer (N.Y.), the third-ranking Democrat in the Senate, asked whether the United States would allow itself “to be driven into default and financial calamity by a small group of extreme right-wing ideologues in the House GOP.”

Charging that House Republicans are “becoming increasingly isolated,” Schumer urged them to seize a “life line” thrown to them by Grover Norquist, president of Americans for Tax Reform, who was quoted in a Washington Post editorial Thursday as telling the paper’s editors that the elimination of a tax cut or special-interest tax break would not necessarily amount to a tax increase.

However, Norquist backed away from the reported remarks Thursday, saying his influential group would oppose any move to allow the 2001 and 2003 tax cuts by the George W. Bush administration to expire as currently scheduled. He asserted that expiration of the cuts would amount to a tax increase.

As the contentious budget talks dragged on, White House spokesman Jay Carney said Wednesday that Obama could accept an extension of the debt limit by “a few days” if it allowed a long-term deficit-reduction and debt-ceiling deal to work its way through Congress. Obama had pledged to veto any short-term measure to raise the debt ceiling.

The White House concession added to a whirlwind week in which negotiations appeared to be changing daily. At first, leaders were focused on a fallback plan that would raise the debt ceiling but do little to control future borrowing. Then they started considering an ambitious but complicated bipartisan strategy for raising taxes and cutting cherished health and retirement programs.

By Wednesday evening, as Boehner and Cantor huddled with Obama at the White House, aides in both parties said a grand bargain to slice $4 trillion out of the federal budget over the next decade was back on the table.

All of those options remain in the mix. “There are multiple trains heading towards the station, and we have to decide,” Carney said before Obama met with the two GOP leaders. “We need to be sure that that fail-safe option is there — even as we pursue, aggressively, the possibility of doing something bigger.”

Republican leaders went on record 10 days ago against the Obama proposal, saying that as long as the deal included higher tax revenue, it could not pass the House. And they maintained that stance after Wednesday’s meeting.

In a brief interview after the White House meeting, Cantor said he remained committed to “not raising taxes” but did not deny that discussions included a larger plan. “Again, there are a lot of things that may or may not be possible, but we’re just trying to drive toward a result right now,” he said.

The mood has changed in the past two days after the bipartisan “Gang of Six” senators unveiled a plan to shave at least $3.7 trillion off the deficit. Despite the fact that the plan included new tax revenue by closing loopholes, it received a relatively warm reception in some Republican quarters.

That has given Democrats hope that GOP resistance to a rewrite of the tax code that would raise significant new revenue — a key goal of negotiations between Obama and Boehner — may be weaker than previously believed.

Still, the proposal came under fire Wednesday from some key Republicans, including House Budget Committee Chairman Paul Ryan (R-Wis.), who said it calls for a tax increase of at least $2 trillion over the next decade.

By Wednesday afternoon, Senate Budget Committee Chairman Kent Conrad (D-N.D.), a leader of the Gang of Six effort, said his primary push now is for “an option at some point for the Senate and the House to vote on the plan we’ve put together — which is the only bipartisan plan that’s come from anywhere.”

As the negotiations moved closer to the Aug. 2 deadline, the key obstacle to a deal remained the vehement opposition among many House Republicans to the proposals, especially ones that include higher tax revenue.

Some Democrats and administration officials question whether the GOP leadership can effectively sell a compromise to a fractious caucus determined to cut spending at all costs, particularly the bloc of 87 freshman Republicans. Democrats say they are not sure if there is any way to satisfy the needs of that faction. “We want to accommodate their needs,” Sen. Benjamin L. Cardin (D-Md.) said of the House leaders. “We just don’t understand what their needs are.”

In part, this is the same dilemma facing GOP leaders as they try to negotiate. They don’t know what will sell, and selling is the only option they have. Boehner is not an arm-twister — as he campaigned for the speaker’s chair last year he vowed that he would take a more gentle, consensus-driven approach. Rank-and-file lawmakers are surveyed, their opinions sought out, their temperature taken, and then decisions are made about how to maneuver.

“It’s not an issue of style as much as it is an issue of the American people just aren’t where we need them to be yet in order to move the Congress,” said Rep. Devin Nunes (R-Calif.).

“Part of this is just a slow education process of having people come to the realization of what it’s really going to take to balance the budget,” Nunes said. “I don’t think having a strong-arm style would have been any more helpful. It probably would have hurt early on.

For the moment, Democrats are still waiting for an answer from House Republicans about the direction to take. “We have a plan to go forward over here, so I await word from the speaker,” Senate Majority Leader Harry M. Reid (D-Nev.) said Wednesday.

Later, after the meeting with Obama and Vice President Biden, Boehner huddled in the Capitol with a group of freshman lawmakers. GOP aides said it could be several more days before Boehner’s leadership team makes clear which path it intends to pursue.

Republicans are awaiting the outcome of the Senate’s debate on a bill that places caps on federal spending and then sends a constitutional amendment to the states mandating a balanced budget.

With Democrats in control of the Senate, that proposal’s defeat is likely to come by the weekend.

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