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Obama-Boehner talks collapse, House Republicans say


By Paul Kane, Lori Montgomery and William Branigin, Updated: Friday, July 22, 6:00 PM


Debt-reduction negotiations between President Obama and House Speaker John A. Boehner collapsed Friday, derailing an effort to reach a landmark agreement to cut spending, overhaul the tax code and avert a government default, according to senior House Republican aides.


House leaders are now working with Senate leaders to craft an alternative plan to raise the federal debt limit, but so far they have not reached agreement on a way to meet an Aug. 2 deadline and avert a potentially major fiscal crisis.


Boehner (R-Ohio), who had been negotiating a $3 trillion deficit-reduction deal with Obama, planned to notify his Republican Conference of the development in a letter Friday night.


Word of the collapse of the talks came hours after Obama publicly reiterated his insistence that any broad deficit-reduction plan must include new tax revenue in addition to large spending cuts. Earlier Friday, the Senate rejected a bill from the Republican-controlled House that would have required a balanced-budget amendment and massive cuts, but no tax hikes.


The Senate also set aside immediate plans to consider a bipartisan measure to raise the federal debt limit and avert a government default, leaving it to the House to approve such a plan first. The moves were made in the hope that the House can pass the so-called “grand bargain” to reduce the deficit and raise the debt ceiling next week.


Speaking at a town hall meeting at the University of Maryland in College Park, Obama told a largely supportive audience, “We can’t just close our deficit with spending cuts alone.” That would mean senior citizens would have to “pay a lot more for Medicare,” students would have trouble getting education loans, job training programs would be trimmed and there were be “devastating cuts” in medical and clean-energy research, he said.


“If we only did it with cuts, if we did not get any revenue to help close this gap . . . then a lot of ordinary people would be hurt, and the country as a whole would be hurt,” Obama said. “And that doesn’t make any sense. It’s not fair. And that’s why I’ve said, if we’re going to reduce our deficit, then the wealthiest Americans and the biggest corporations should do their part as well.”


Obama spoke a day after his talks with Boehner on a far-reaching deficit-reduction plan ran into a revolt from Democrats furious that the accord appeared to include no immediate provision to raise taxes.


With 11 days left until the Treasury begins to run short of cash, Obama and Boehner were still pursuing the most ambitious plan to restrain the national debt in at least 20 years. Talks focused on sharp cuts in agency spending and politically painful changes to cherished health and retirement programs aimed at saving roughly $3 trillion over the next decade.


But in his remarks Friday, Obama appeared to stick to his insistence that any large deficit-reduction deal include increased tax revenue. He provided no details of his talks with Boehner and made no mention of Democratic lawmakers’ objections to what they were told was a plan to postpone rewriting the tax code.


“This idea of balance, this idea of shared sacrifice, of a deficit plan that includes tough spending cuts but also includes tax reform that raises more revenue, this isn’t just my position,” he said. “This isn’t just a Democratic position. This isn’t some wild-eyed socialist position.” Rather, it argued, it is a position taken in the past by presidents from both parties who have signed major deficit-reduction deals.


“So we can pass a balanced plan like this,” Obama said. “The only people we have left to convince are some folks in the House of Representatives. We’re going to keep working on that.”


Obama also spoke forcefully about the need to raise the $14.3 trillion debt ceiling in the coming days.


“The one thing we cannot do is decide that we are not going to pay the bills that previous Congresses have already racked up,” he said. “The United States of America doesn’t run out without paying the tab. We pay our bills. We meet our obligations. We have never defaulted on our debt. We’re not going to do it now.”


After a 51-46 vote in the Senate against the House act to mandate balanced budgets, Majority Leader Harry M. Reid (D-Nev.) told his colleagues that the “Senate will wait anxiously” as the president and speaker continue their bargaining .


Boehner has told Reid and his own House colleagues that, if that deal comes together, the House must pass it by Wednesday to leave enough time to approve the comprehensive measure in the Senate, where parliamentary hurdles could drag out the process perilously close to the Aug. 2 deadline.


The Obama-Boehner plan is far more sweeping than the backup plan that Reid and Senate Minority Leader Mitch McConnell (R-Ky.) had been drafting, and its potential sweep has frayed nerves among both liberals and conservatives.


Lawmakers on both sides of the aisle say they are anxious to see the final framework and its impact on tax rates and cuts to popular entitlement programs. Reid, who was briefed by Obama Thursday night, along with other Democratic leaders, did not publicly endorse the emerging plan Friday morning.


“A lot of what’s going on, we don’t know,” he said in a speech on the Senate floor. “I wish them well.”


The deal that Obama and Boehner are trying to forge does not include specific tax increases as part of legislation to lift the debt limit, Democratic lawmakers said. Instead, savings would be generated through an overhaul of the tax code that would lower personal and corporate income tax rates while eliminating or reducing an array of popular tax breaks, such as the deduction for home mortgage interest. The tax rewrite would be postponed until next year.


Democrats reacted with outrage as word of that framework filtered to Capitol Hill Thursday, saying the emerging agreement appeared to violate their pledge not to cut Social Security and Medicare benefits as well as Obama’s promise not to make deep cuts in programs for the poor without extracting some tax concessions from the rich.


When “we heard these reports of these mega-trillion-dollar cuts with no revenues, it was like Mount Vesuvius. . . . Many of us were volcanic,” said Sen. Barbara A. Mikulski (D-Md.).


White House budget director Jacob J. Lew denied that a deal without taxes was in the works. “We’ve been clear revenues have to be part of any agreement,” he told reporters.


After a lunchtime meeting between Lew and Senate Democrats, Reid made no attempt to hide his anger, telling reporters that his caucus would oppose the “potential agreement” because it appeared to include no clear guarantee of increased revenue.


“The president always talked about balance, that there had to be some fairness in this, that this can’t be all cuts. There has to be a balance. There has to be some revenue and cuts. My caucus agrees with that,” Reid said. “I hope that the president sticks with that. I’m confident that he will.”


Congressional and administration officials said the White House informed Democratic leaders about the talks after Obama met privately with Boehner and House Majority Leader Eric Cantor (R-Va.) late Wednesday. Congressional aides, speaking on the condition of anonymity to detail private discussions, said the White House acknowledged that the emerging agreement is “to the right of the Gang of Six” — a bipartisan Senate debt-reduction framework unveiled this week — 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.


Obama summoned top Democratic leaders in both the House and the Senate back to the White House later Thursday for further discussions.


While Senate Democrats fumed, other Democratic officials familiar with the administration’s approach to the talks said the goal is still to reduce the debt in a balanced way that tackles both the tax code and rising entitlement spending. While the two sides are nowhere near an agreement, the officials said, they are focused on a two-part package. The first measure would raise the debt limit through 2013 and specify cuts to domestic agencies, including the Pentagon, over the next decade.


If both sides agree, that measure could also include some tax and entitlement changes, such as ending breaks for corporate jets, raising the Medicare eligibility age or changing the measure of inflation used to adjust Social Security benefits. However, the largest tax and entitlement changes are likely to be left until next year, the officials said, when policymakers will have more time to weigh the effects on taxpayers, program beneficiaries and the economy.


The officials said the toughest part of the negotiations has been finding common ground on the magnitude of those changes and the shape of a mechanism that would automatically cut spending or raise taxes if Congress fails to follow through. In any case, the officials said, no taxes would go up and no entitlement changes would take effect until at least 2013.


Before leaving for the White House on Thursday, Reid cut short debate on the GOP bill that would impose federal spending caps and send a constitutional amendment requiring balanced budgets to the states for ratification. Reid had considered extending debate into the weekend, but instead he angrily declared it was “perhaps some of the worst legislation in the history of the country” and set the final vote for Friday.


If the Obama-Boehner deal comes together, House Republicans would move the legislation first in their chamber, perhaps later next week, according to a senior Senate GOP aide. This move would short-circuit a previous effort by Reid and Senate Minority Leader Mitch McConnell (R-Ky.), who have been crafting a backup plan that would allow Obama to increase the federal debt limit himself unless a two-thirds majority in Congress objected.


Policymakers are racing to forge agreement on a plan to stabilize the soaring national debt before Aug. 2, when the Treasury will be unable to pay the nation’s bills without additional borrowing authority. Lawmakers in both parties are reluctant to raise the $14.3 trillion debt limit without a clear plan for restraining future borrowing. But they are running out of time to strike such a deal, draft legislation, submit it to congressional budget analysts and win the votes needed to push it through Congress.


Despite the loudly ticking clock, Obama and Boehner are trying to revive the “grand bargain” that eluded them earlier this month. Then it was Republicans, including Cantor and other conservatives, who raised objections, saying they were unwilling to trade tax increases of as much as $1 trillion over the next decade for deep spending cuts and significant changes to Social Security and Medicare.


Since then, with polls showing increasing public annoyance with GOP intransigence, Cantor has signaled that his views on a grand bargain are in flux. So Boehner restarted talks with the White House. The White House, in turn, according to congressional sources, dropped its demand for a big upfront concession from Republicans: an agreement to immediately extend tax cuts enacted under President George W. Bush for middle-class households, leaving cuts benefiting the wealthiest households to expire on schedule next year.


Democrats said this element of the deal would have given them leverage against Republicans to force a rewrite of the tax code that raises revenue. Republican leaders are insistent on extending tax cuts for the highest earners, including many entrepreneurs and business owners. If that part of the bargain were taken off the table, the aides said, Democrats see no guarantee that Republicans would actually agree to an overhaul of the tax code that raises revenue.


Democratic Senate 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.


Reid said Friday that because of “changed circumstances,” as well as the constitutional requirement for revenue bills to originate in the House, he was dropping his call for the Senate to remain in session this weekend.






Staff writer Felicia Sonmez contributed to this report.