The Price of Politics (18 page)

Reactions were mixed. It was a start, there had been some progress, but they were not there. Yet Neil Bradley, Cantor’s policy director, remarked, “Where else do you walk into a room and find $123 billion in savings?” And it had only taken a few hours.

• • •

At the third meeting, May 12, Biden gathered the group at Blair House.

Early on they came to the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. It covered some
44 million Americans and it was one of Cantor’s favorite targets. Significant savings were available because of the number of “scams,” he said.

One such scam was connected to the Low Income Home Energy Assistance Program (LIHEAP), which provided money for home heating. In many states, qualifying for LIHEAP granted automatic eligibility for food stamps. In some cases, the heat-and-eat policy meant that a $1 heating assistance check established categorical eligibility for food stamps. Investigators had found that some LIHEAP checks were going to people whose heating bills were included in their rent.

We believe states have too little incentive to prevent otherwise ineligible individuals from receiving food stamps, Cantor said. He had examples from New York and Vermont and, he whispered to Van Hollen, he also had some from Maryland.

In addition to tightening eligibility requirements, Cantor wanted to eliminate SNAP’s nutrition education funding, increase work requirements, and eliminate duplicative job training programs. This could add up to huge savings.

• • •

As the group gathered in Room S219 on the Senate side of the Capitol on May 24, day four of their meetings, Jack Lew was seeking someone to do some political wet work. Before everyone was seated, he pulled Van Hollen aside.

Will you take on Baucus on farm subsidies? he asked. The White House wanted to cut them, and Baucus, a 32-year Senate veteran, was deeply committed to the special interests of farmers and ranchers in his home state of Montana. A sign in his office read “Montana Comes First.” He had said he was going to revisit the issue, and the White House did not want to challenge the powerful Senate Finance chairman openly. Would Van Hollen take on the task?

The House Democrats had $20 billion in proposed agriculture cuts, and Van Hollen thought they should be higher. The House Republicans had $30 billion in their budget.

Van Hollen agreed to do the deed.

“We’re not leaking!” Biden began in some wonderment as everyone sat down. Three days of meetings and no leaks to the media! They must be serious! It was a sign of their commitment. He was proud of them, almost gleeful.

But then he dampened the mood by turning to Medicare. After Social Security and Defense it was the government’s most expensive program. It would cost $520 billion that year, and the price tag was expected to double to more than $1 trillion a year in the coming decade. An April 11, 2011,
Washington Post
/ABC News poll showed that 78 percent of the public “oppose cutting spending on Medicare as a way to chip away at the debt.”

They talked about “reform”—avoiding the word “cut”—but no one had much to suggest.

Talking about Medicare cuts was dangerous territory for Democrats, and Biden moved them on to a topic at least as sensitive for Republicans.

“We’re going to insist revenue’s on the table,” he said. “We know you don’t agree to that,” he added, looking at Cantor. “But the key from our perspective is that we be very unambiguous about the need to have a discussion about it.” It had to have an airing. “From our perspective, it has to be part of a final agreement.”

Cantor and Kyl jumped in hard.

You have to understand, said Cantor, we need to get to 218 votes in the House. “My guys don’t even believe default is a problem,” he said, referring to the Tea Partiers in the Republican conference.

The Democrats knew that Cantor wasn’t kidding. The Republican presidential primary debates were in full swing and Tea Party–backed candidates such as Representatives Michele Bachmann of Minnesota and Ron Paul of Texas were calling loudly for Congress to refuse to raise the debt limit.

Biden stood firm: Revenues had to be part of the deal. You don’t get to have a one-sided deal just because your side is more unreasonable than ours, he said. We can’t take credit for our Luddites—neither can you.

Kyl, who often called tax revenues “the subject which shall have no
name,” said he and Cantor had already agreed to some aviation and pension fees.

“That won’t do,” Biden said. These collections were not counted as tax revenue by the Congressional Budget Office and other experts.

Kyl disagreed. Fees are revenue. It was money going into the federal coffers.

Biden asked Lew to go over some previously agreed-upon savings. Lew raised farm subsidy savings. They were between the Democrats’ $20 billion and the Republicans’ $30 billion.

They were taking too much from subsidies, Baucus exclaimed.

That was Van Hollen’s cue. “Commodity prices are through the roof,” he said. Farmers and ranchers were cashing big subsidy checks at the same time their crops and livestock were selling for more than ever.

I might be willing to agree to the proposed agriculture subsidy cuts, Baucus said, but only if other things took a big hit too. And, he noted, the high commodity prices on corn and other produce were sure to drop someday, so the overall issue should be put off.

It was finally agreed that Baucus would come up with a detailed plan for agricultural cuts. There was skepticism among the negotiators that he would provide a serious proposal, but they agreed to wait.

Lew raised the issue of drug reimbursements for those eligible for both Medicare and Medicaid, the elderly poor. Under Medicaid, pharmaceutical companies were required to sell drugs to the government at a price equal to the best price offered on the private market or about 15 percent below the average private market price, whichever was lower. If Medicaid paid more than that over a given period of time, pharmaceutical companies were required to pay a rebate to the government.

Lew asked if it were possible to get more rebates from the drug companies.

Many Republicans, including Cantor, saw the attempt to reduce payments to pharmaceutical firms as dangerous. We need higher prices, he said, surprising many. Higher prices incentivize innovation by the drug companies. If we make the drug companies pay more,
we will kill innovation, new drug development, it could even kill the industry.

Wait, said Van Hollen. The Medicare prescription drug benefit program for seniors, so-called Part D, which had passed under the Bush administration with some Democratic support, had been a boon to the drug companies. More seniors could now afford drugs, a good thing, and the drug industry sold a staggering number of additional drugs. They should pay rebates.

“You’re getting into a big issue,” Baucus said. The pharmaceuticals industry had already sacrificed a lot under the Obamacare legislation, agreeing to take $100 billion less over 10 years from Medicare.

Senator Daniel Inouye showed his impatience. “Outside groups think we’re not serious,” he said. His tone indicated that he didn’t necessarily disagree. “We need to make cuts and vote on them next time.”

Yes, Biden agreed, they had to prove they were serious. But he deflected the idea of voting in the near term.

After the meeting, Biden pulled Van Hollen aside. They agreed that discussing Medicare reform had put them in the extreme danger zone.

“We started these talks in water up to our ankles,” Van Hollen said, “and it is rising fast and is about up to our chests, but still not over our heads.”

He wanted to make sure they didn’t drown. Later, he spoke with Pelosi, urging her to tell Biden that the Democrats had to meet with the president. They needed to be sure they knew where they were going.

On May 26, Biden called the group together for its fifth meeting, a perfunctory session where little was accomplished.

By this point, the vice president was hoping to hit $2 trillion in deficit reduction and then fight out the big Medicare and taxation issues in the 2012 election.

With $1 trillion in agreed-upon cuts to general spending over 10 years, $250 billion from mandatory programs such as food stamps, farm subsidies and federal retirement, and another $250 billion in Medicare and Medicaid cuts, they could get to $1.5 trillion. Add in 20
percent interest savings over ten years—from not having to borrow that $1.5 trillion—and the deal would be up to $1.8 trillion.

If Biden could get the Republicans to kick in $200 billion in revenue, they’d be up to $2 trillion. It seemed possible.

• • •

Biden convened the sixth meeting in Senator Reid’s ceremonial office, S219, on Thursday, June 9. Once again, he insisted that revenue was going to be necessary, and asked Baucus, as longtime head of the Finance Committee, if he wanted to make the case.

The short answer was no. Baucus wasn’t used to having ideological arguments during a negotiation, and on taxation issues he often voted more like a Republican than a Democrat.

As Senate Finance Committee chairman in 2001, he was one of the 12 Democrats who voted for the Bush tax cuts (which passed the Senate 62–38). He was the only one of the six senators on the Simpson-Bowles commission to vote against that $4 trillion deficit reduction plan.

So Biden turned the floor over to Geithner, who spent little time on income tax rate increases, focusing instead on Obama’s plan to limit deductions for people filing in the top brackets. It could raise $290 billion.

That should be considered part of overall tax reform, the Republicans responded.

Kyl teased Van Hollen, who had apparently missed a meal, for devouring an entire bowl of popcorn that was sitting on the table.

Baucus pushed for closing a fossil fuel tax loophole.

What about the loophole on mining activity, Max? Kyl inquired mischievously. He knew Baucus didn’t want to close that. Mining was big in Montana.

They kept coming back to the question of revenue, and the Republicans’ refusal to address it.

“This is our come-to-Jesus moment,” Biden said.

“Yeah,” said Cantor, who is Jewish, “but I’m not very good on that point.”

Cantor’s joke masked a serious point: Biden shouldn’t expect any sudden conversions from the Republicans on taxes.

• • •

Biden was encouraged by the fact that he and Cantor seemed to be settling into a comfortable working relationship, based in part on mutual recognition that neither was running the show.

You know, if I were doing this, I’d do it totally different, Biden told Cantor during one of the private asides they frequently had after the meetings.

Well, if I were running the Republican conference, I’d do it totally different, Cantor replied.

They agreed that if they were in charge, they could come to a deal.

B
iden called the Democrats in his group to his Senate office on June 14 before the seventh day of talks. They were not happy.

The White House was changing the numbers, Van Hollen complained. The president’s proposal in April had contained cuts of $900 billion to general federal spending, including Defense, over 10 years. It was the largest number they had discussed. Now the administration was suddenly talking about $1.1 trillion—$200 billion more in cuts. What was going on? Were they measuring something different?

No, it was an additional cut, Lew said.

That’s a very big number, Van Hollen said, and it would be difficult.

“I’m confident we can get to a minimum of roughly $1 trillion,” Biden said.

Van Hollen was disheartened. It sounded to him as though the vice president was beginning to adopt the Cantor-Kyl position. The administration seemed to be retreating.

The sudden addition of $200 billion in cuts was a clear illustration of how squishy all the numbers were. How could this big number appear out of the blue at the same time as they were having niggling debates over a $10 billion or $20 billion cut?

• • •

At the full meeting later that day, Kyl joked that he wanted to make sure there was a full bowl of popcorn for Van Hollen.

The House budget, Cantor pointed out, had $1.7 trillion in cuts to general federal spending. That was $600 billion more than the $1.1 trillion the White House was now proposing. Whatever number they agreed to, they should have one number and no firewalls—partitions between Defense and all other spending that assured a certain percentage of cuts came from Defense. “Let the Senate and White House battle it out,” he said. Since the Democrats controlled both, he was telling the Democrats to negotiate with themselves.

Van Hollen said firewalls had a precedent. Budget agreements in 1991, 1993 and 1997 all had them. He said the 193 Democrats would not go for deep general cuts without firewalls.

But the administration might be able to go without firewalls, Biden interjected, eager to get an agreement.

Not helpful at all, thought Van Hollen.

Biden later backtracked some, suggesting a 50–50 Defense/non-Defense firewall for just two of the 10 years.

Inouye repeated what he had told the Democrats in their pre-meeting: Defense could be cut. Domestic programs needed protection.