“Further discussion necessary to finalize,” Boehner aide Brett Loper wrote in the GOP counteroffer he e-mailed to the White House.
Loper hit the send button at 6:55 p.m. Sunday. Nabors replied immediately.
Timeline: The ‘grand bargain’ that fell to bickering
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This is the first in an occasional series of stories that assesses President Obama's first term — his record, governing methods, and political beliefs.
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Thanks, Obama’s legislative liaison wrote. We’ll get right to work.
The next morning at the White House, top aides circulated Boehner’s latest offer throughout the West Wing. They met repeatedly in Daley’s office, scouring budget tables and Democratic vote sheets. By mid-afternoon, they told the Republicans that they were about to take a plan to the president for his approval.
A senior administration official said the White House team recognized that the two offers were coalescing and that the time for a decision was at hand. People asked themselves, the official said: Is this something we can sell? Is this a deal we can live with?
At the Capitol, the Republicans waited. Shortly after 6 p.m., Daley called Boehner’s office and said an update was on the way. None came, and four hours later, Jackson told his staff to go home. The White House, he said, was continuing to “massage their counter on all sections.”
The next morning, Nabors called Jackson with an ominous question: Have you heard about the Gang of Six?
Nabors was using the Beltway shorthand for a group of senators — conservatives and liberals — who had been working for months on a long-range deficit-reduction plan based on recommendations from a fiscal commission Obama appointed the previous year.
The group included Sen. Richard J. Durbin (D-Ill.), a close ally of the White House, and Sen. Saxby Chambliss (R-Ga.), one of Boehner’s dearest friends. Another participant, Sen. Tom Coburn (R-Okla.), was close to Obama and Boehner. The senators said they kept Boehner and administration officials informed about their work. They said the White House had been pressing them for months to put something out, believing that getting a few Republicans to sign on to any tax increase would build momentum.
“The fact that we had Republicans willing to discuss revenue was a breakthrough,” Durbin said. “That’s why [the White House] thought it might help move the conversation forward in the House.”
The Gang of Six was unable to seal its own deal. But that morning — a Tuesday — they finally revealed their work at a closed-door briefing for 64 fellow senators. Coming at that moment, it had an unintended effect.
Desperate to resolve the debt-limit deadlock, senators enthusiastically and publicly latched on to the proposal, which included more taxes and stronger protections for the poor and elderly than the still-secret Obama-Boehner framework. Dozens of senators emerged from the briefing praising the group’s work, including Republicans such as Lamar Alexander (Tenn.), then the third-ranking member of his party’s leadership team. The Gang of Six had “come to a bipartisan agreement,” Alexander told reporters, “and I support it.”
At the White House, Obama showed equal enthusiasm. He made a rare appearance in the White House pressroom, surprising reporters who had been awaiting the regular briefing from press secretary Jay Carney. As Carney stood to the side, the president hailed the plan as “broadly consistent with what we’ve been working on here in the White House and with the presentations that I have made to the leadership when they have come over here.”
In private, however, he and his aides were alarmed. The emerging deal with Boehner looked timid by comparison.
“The Democratic leaders already thought we were idiot negotiators,” Daley said. “So I called Barry [Jackson] and said, ‘What are we going to do here? How are we going to sell Democrats to take $800 billion when Republican senators have signed on to” nearly $2 trillion?
Daley added,“I don’t think it was a mischaracterization on our part to say we’d be beat up miserably by Democrats who thought we got out-negotiated.”
In lauding the plan quickly, Obama hoped to harness the enthusiasm for it on behalf of his own talks. But his appearance that day caused more problems by increasing suspicions among conservatives about the group’s framework — and boosting their distrust of any bipartisan dealmaking.
Coburn, a staunch conservative and the only member of his party who openly acknowledged the need for higher taxes to balance the budget, had developed a close personal bond with Obama dating to their shared opposition to federal budget earmarks when both were senators. But Coburn was “shocked,” he said later, when he saw Obama’s remarks that day on television. His effusive praise for the Gang of Six, Coburn believed, was a tactical mistake that revealed Obama’s inexperience in the ways of Washington. It signaled to skittish conservatives that a tax hike was on the way.
Obama’s announcement, Coburn said in an interview, “absolutely killed anything we were doing with the Republicans.”
That afternoon, with concern mounting in the West Wing, Nabors called Boehner’s office with a message from the president: He still wants a deal.
Obama had empowered the aide who knew the Hill best to try to pull it out. Shortly before 7 that evening, he sent a new proposal that, Republicans said they were told, had not been vetted by other senior advisers at the White House. It was his own pitch, underscored by its title: “Deficit Reduction Package — Nabors Draft.”
His plan backed away from earlier positions on taxes in a number of ways, including pushing the top rate below 35 percent. But there was a deal-breaker for the Republicans — a demand for additional tax increases to match proposed cuts to Medicare and Medicaid. To keep the health-care cuts, a critical component of the deal for the GOP, Republicans would have to swallow about $400 billion more in tax hikes — a 50 percent jump from the figure that had been under discussion.
Inside the White House, the offer reflected the new political reality shaped by the Gang of Six. In light of that farther-reaching proposal, White House officials worried that the deal under discussion with Boehner would meet resistance, particularly among Obama’s Democratic supporters. Higher taxes explicitly targeted toward the wealthy offered an element of fairness, in the White House view, and a way to sweeten any deal for the Democratic base.
Obama aides said the new offer also reflected their frustration at what they described as an unrelenting effort by the GOP to cut safety-net programs. “They say: ‘You moved the goal posts. You derailed this entire thing,’ ” said a senior administration official. “But it was simply a recognition of what they were demanding.”
The official said the Republicans wanted “game changers” on Medicare and Social Security; they said they needed an “Obama scalp.”
“We said, ‘Look, guys, in a world in which the Gang of Six just came out today, if you’re doing all those things, a fair and balanced approach involves more revenue,’ ” the official said. “At the time, nobody in the room, neither us nor them, thought that anybody was moving the goal posts.”
The Republicans describe it differently. The news from the White House, they say, was a “tough blow” to Boehner, who saw the push for additional taxes as tantamount to Obama violating a “gentleman’s agreement” on the broad outlines of a plan for which the speaker was already taking heat from some in his ranks.
By Wednesday morning, as the Obama and Boehner sides gathered again in the Oval Office, the optimism of Sunday had disintegrated. Vice President Biden, a skeptic of restarting talks with Boehner after the first round collapsed, was there. There appeared to be a very different president in attendance, as well.
Excited and upbeat three days earlier, Obama now was stern and lecturing. According to notes taken by GOP aides, he opened by complaining about Boehner’s demand for $200 billion in Medicaid cuts, a persistent point of contention. Then he began to talk about taxes, saying the Gang of Six “makes things more complicated.” The White House would need more tax revenue or smaller health-care cuts.
Boehner opened by expressing continued support for a big deal. But he told Obama that Republicans could not sign off on $1.2 trillion in new taxes. “I cannot go there,” he said. Nor could he sell $800 billion in tax increases without cuts to federal health programs, the biggest drivers of future borrowing.
Annoyed, Obama invoked Boehner’s personal friendship with Chambliss, a member of the Gang of Six, warning that Democrats would never support the package under discussion when “your friend Saxby” and other Republicans were willing to stomach as much as $2 trillion in new taxes. Negotiations deteriorated from there.
Boehner said Republicans could accept automatic repeal of the top-end Bush tax cuts as an enforcement trigger only if that were balanced by automatic repeal of a key piece of Obama’s signature health-care law, the individual mandate. Here in the president’s own office, Boehner used the most derisive terminology of conservative critics, calling it “Obamacare.”
Obama laughed. Then he joked that maybe the trigger should be his own removal from office. Biden deadpanned: Republicans might just go for that.
On Thursday morning, aides to Boehner and Cantor gathered again at the White House. During a two-hour meeting, the two sides hashed over minute details of a deal, never actually killing the president’s request for additional tax revenue.
Later that day, Obama called Boehner. The two spoke as if an agreement was still possible.
“We’re close,” Obama said. “Call me back.”
That night, Obama prepared his party’s congressional leaders. He warned Senate Majority Leader Harry M. Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) that he might return to the position under discussion the previous Sunday — that is, cuts to Social Security, Medicare and Medicaid in exchange for just $800 billion in tax increases.
Would they support him?
The Democratic leaders “kind of gulped” when they heard the details, Daley recalled.
By this time, Obama had become the face of the bitter debt-ceiling talks and his poll numbers were dropping. His allies on Capitol Hill cringed at his predicament but also at what he was asking them to do.
Dan Pfeiffer, the White House communications director, recalled that the president and his team felt the weight of the global economy “on our shoulders.”
“Is there political benefit to coming to a big budget deal with John Boehner? Sure,” Pfeiffer said. “But every other political and message imperative was thrown out the door to prevent a disaster and do the right thing for the country. That’s why we were willing to do things we wouldn’t normally do.”
Reluctantly, Reid and Pelosi agreed to do their best to support the plan.
Boehner, meanwhile, had gone dark.
The House speaker did not return Obama’s call until 5:30 p.m. the next day, a Friday, when he told the president that he was again breaking off the talks. The two men staged dueling news conferences. Obama said angrily that he had been “left at the altar” again. Boehner said dealing with the White House was “like dealing with a bowl of Jell-o.”
“There was an agreement with the White House for $800 billion in revenue,” Boehner told reporters. “It was the president who walked away from this agreement.”
Two day later, July 24, one week after the Sunday morning meeting that sparked such optimism, the president found himself trying to turn back the clock.
Working late into the evening, Obama asked someone to get Boehner on the phone. His message: I’ll take your last offer.
“Mr. President,” Boehner answered, “we don’t have time to reopen these negotiations.”
White House officials said this week that the offer is still on the table.
The following night, Obama delivered a prime-time address from the East Room to update Americans on the status of the talks. He left no doubt about whom he intended to blame for the failure of the grand bargain.
The only reason a deal is not on its way to becoming law, he said, “is because a significant number of Republicans in Congress are insisting on a different approach — a cuts-only approach — an approach that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all.”
In the following days, congressional leaders and Obama worked out a bare-minimum agreement to lift the government’s borrowing limit just enough to get past the election.
The tough choices on deficit reduction were handed to a special House-Senate “supercommittee,” and if that group failed to secure legislation by the end of 2011, then the deal required $1.2 trillion in automatic, across-the-board cuts to agencies, including the Pentagon.
Although Obama had denounced “kick the can down the road” deals as a candidate in 2008, he was now adjusting to the realities of his office. The agreement was at least a tactical victory. He used it to wash his hands of Washington’s dysfunction, presenting himself as a well-intentioned man unable to secure a fair deal, because of the capital’s enduring partisanship.
But White House advisers conceded that the collapse of the debt talks was a disaster from a policy perspective and, at least in the short term, from a political one. For the first time, Standard & Poor’s, the credit rating agency, downgraded U.S. debt. Polls showed that the public blamed Obama as well as congressional Republicans, with approval ratings for both reaching new lows.
In mid-August, Obama escaped for a week of golf and relaxation with his family on Martha’s Vineyard. He reviewed his strategy, concluding that it was time for a dramatic shift in approach. With the debt-ceiling debate over, he would focus more fully on jobs, the chief concern of most Americans, including his Democratic base.
At the White House, economic advisers who had devoted so much time to meeting with House Republicans now turned their attention to drafting the American Jobs Act, a package that would extend a temporary payroll tax holiday, provide fresh money for roads and bridges — and set up a new confrontation with Republicans.
“You say you’re the party of tax cuts? Well then, prove you’ll fight just as hard for tax cuts for middle-class families as you do for oil companies and the most affluent Americans,” Obama said to thunderous applause at a Labor Day speech in Detroit. “We’re going to see if congressional Republicans will put country before party.”
Suddenly, the same Democrats who had accused Obama of meekness in negotiating with the GOP were praising his aggressive new tone. What happened during those days in July when the grand bargain was almost reached, but not quite, had changed him. He no longer seemed divided.
His goal now was unequivocal: to win a second term.
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