The Price of Politics (27 page)

“Which raises one other problem, and that is that there were very prominent Republicans in the caucus who told me—to my face—that the view in the caucus was that getting a deal with me would ensure my reelection.

“Very reliable and prominent Republicans say to me, the view among many in our caucus is if we give you a deal, you have taken a major issue away from us. You are seen as the bipartisan leader, and you are a lock for reelection.”

So inside the White House it was generally understood that you were negotiating with Republicans from a position of weakness?

“True,” Obama said. “Now, keep in mind, I never said this to them.”

• • •

In a near-crisis atmosphere, Obama summoned congressional leaders to the White House at 6:10 p.m., Sunday, July 10, 2011.

The feeling in the White House was that Cantor was perhaps the single biggest stumbling block between them and a deal.

“Cantor needs to be in the room,” the president told his senior staff. “I want to look everyone in the eye.”

But if Cantor was in the room, then Hoyer, the minority whip, needed to be there, too. And if Hoyer and Cantor had to be in the room, then so did the Senate whips, Durbin and Kyl.

So it was an unwieldy eight who gathered in the Cabinet Room with three weeks to raise the debt ceiling or face the unthinkable prospect of a debt default.

“We talked about options,” the president began soberly. “We need to talk about what we should do. We need to talk about if there are other alternatives. I asked you if there were other alternatives.” They were practically starting from scratch. He seemed to be groping for a solution, even something unconventional or against the grain. They had a lot to do. “I want to talk about the process for the week and how we’re going to get through this.”

He said he still hoped for the “big deal” of some $4 trillion in deficit reduction. All the leaders in the room had said they were for the “big deal,” except Cantor and Kyl.

On the agenda, Obama said, were “changes in Medicare, Medicaid, potentially Social Security. We would keep the structure of these programs, but bend the cost curve.”

The House Republicans wanted an overhaul: to change the structure and concept of these entitlement programs. It was a profound difference.

The president continued, “A commitment to work for middle-class tax cut extension, tax reform by a date certain that would capture the revenue necessary to meet whatever target we set as part of the tax reform exercise. Discretionary cuts of a significant amount, such as those that the vice president’s been talking about in his discussions. This would achieve a sustainable deficit and debt, even with CBO’s numbers.”

He maintained that this would leave them with an annual deficit of only 3 percent of the Gross Domestic Product in the out-years, compared to the current 10 percent.

“If the goal is to solve the problem,” Obama said, “I don’t understand why we don’t seize the opportunity. It would not violate either party’s positions. Revenues wouldn’t come from a vote. I understand this pledge that all these Republicans have taken.”

The Republicans thought he really didn’t understand at all. The scheme to decouple the middle-and lower-income tax brackets from the higher brackets was a transparent gimmick.

Obama said he had Speaker Boehner’s statement. “I understand Eric and John anticipate this couldn’t be done. But I told John, ‘If not now, when?’ Then let’s admit that we’re more into playing politics. And maybe I overstated what the traffic will bear. We need to get this through this year. It’s unacceptable to do this every three months. We are not going to do this again.”

Biden jumped in. They all knew that the big deal was the way to go, he said. “We’re not going to become a banana republic. So what is it going to be? Or are we going to live or die on the election?”

“Everyone is being well meaning,” Boehner said. “We’ve been in sincere discussions for weeks, but as I said, the cuts have to exceed the debt limit increase. There is more than one challenge to the big deal. My only concern isn’t just the revenue increase. This could be impossible to draft, as far as my people understand, in terms of the time line of getting this done. And since this has to pass, given the time frame we have, simpler could be better. There might not be enough time for a big deal at this point.” The Biden group’s framework is our most viable option, he concluded.

Reid proposed they consider a procedure similar to that used to deal with the complex and politically charged problem of closing military bases around the country. In the Base Realignment and Closure (BRAC) process, Congress had to vote to close all or none of the bases selected by a panel of outside experts; the legislation could not be amended. The process was more or less working, though he noted some key Republicans had voted against some closures.

Warming to the topic of what he considered Republican intransigence, Reid said, “We had Bowles-Simpson. The Republicans walked out.”

They hadn’t walked out. Three of the Republican lawmakers on the panel had voted against it, but so had three of the Democrats. And the president had never embraced or adopted it.

“Then we had the Biden commission,” Reid said. “We had another walkout,” referring to Cantor and Kyl’s exit from the talks the previous month.

Biden knew it was not a walkout. Given the circumstances of the speaker’s end run, Cantor had handled the matter straightforwardly, and been a gentleman, Biden thought, but he didn’t say anything.

“Then there were talks between Boehner and the president, and there was another walkout. Republicans can’t deliver the big deal,” Reid said caustically. “They’re jeopardizing the future of the country. If Republicans send something at the last minute, a three-month deal, we’re not going to do it.”

“Thursday,” Pelosi said, “the speaker said a bargain was possible. Now he says we don’t have time. Democrats won’t vote for anything that the president won’t sign.”

She turned to Boehner. “Do you have the votes to do it on your own?” Wouldn’t he need some Democrats?

Boehner didn’t answer. Votes were a touchy subject for the speaker, and everyone knew it.

McConnell wanted to work something out. “Let’s see if we can build a deal on what the Biden group did that passes the smell test.” He mentioned a cap on general spending for fiscal years 2012 and 2013. But then he added unhappily, “There’s just no time to put together the big deal.”

“All of us want to get to 218,” Cantor said, ever the vote counter. The Republicans had a majority of 240 seats. He praised the spirit of the Biden group and how collegially they had worked together. He said he agreed with McConnell that, “We have the blueprint that we can build upon. We can exceed the amount that we raised the debt limit. We wouldn’t have to raise taxes, and then frankly we could focus on jobs.” He disagreed with the Senate leaders on timing. “And we could do it in the next couple weeks.”

Cantor also said he could not accept the president’s notion of letting the tax cuts expire and then reinstating them for the lower brackets. “You’re asking us to fundamentally breach our position on the tax issues. That’s where the difference is. For us, a vote to decouple with no guarantee is breaching our position.” The big issues, such as taxes, might have to be left for the 2012 election.

Durbin, the affable Illinois Democrat who was second to Reid in the party leadership, threw some cold water. There was “no indication that the Biden plan could pass the Senate,” he said. “Any indication otherwise is misguided. With no revenue, it can’t pass.”

“Eric,” said Steny Hoyer, “I disagree with you. The oxygen will be taken out of it if we don’t lead.” To Boehner, he added, “John, I want to thank you for your leadership you’ve shown, and you’ve taken some flak for it.”

Kyl tried to focus on the big numbers. “We’re not talking about short-term solutions,” he said. “Mitch McConnell’s talking about entitlement reform. That’s not a short-term solution. The vice president is saying entitlement requires tax changes now, but let’s be clear: Social Security, which people are now discussing, was never discussed in the Biden group. The biggest change we talked about in the Biden group was means testing for those who are already means tested.” That meant only seniors who were well off would see reduced payments.

“So here’s the big question,” Kyl said. “Are you saying even with Biden you have to have revenue?”

Biden responded, We’re going to have to agree not to agree on estate tax or rates. We’ve had these discussions, but we didn’t agree. We can get to $200 billion in revenue.

He seemed to be accepting Cantor’s insistence on revenue neutrality.

Cantor reinforced Biden. “I said yes we can do something on loopholes, but it has to be revenue neutral. If you need to do something on billionaires and corporate jets, etc., for $3 billion, then fine. Let’s just find an offset, use it for some further tax relief.”

So the discussion had gone from Boehner’s $1 trillion, through tax
reform, to Cantor’s $3 billion. To anyone paying attention, there was no progress, and the rift between the speaker and his majority leader was plain to see.

“Listen,” the president said, “we’re going to go back at it tomorrow, day after day, until we get it done. I’m not persuaded by the argument of time. The work has got to be done by someone, somewhere. Let’s come up with a term sheet tomorrow. Eric, you’ve quoted back to me about the next election. I’m appreciative of that. But keep in mind the debt limit was not my choosing.”

The Republicans were leveraging him. Addressing Boehner, he continued, “You said the biggest problem is spending and the deficit. So I am taking you at your word.”

Then, looking squarely at Cantor, Obama said, “You refuse to talk about revenues. If the notion is that you’re going to pocket the stuff you negotiated in Biden and set aside the stuff you have heartburn over, then that’s probably not going to work. I’m not going to be under illusions that the Biden package, that everyone agrees to it. Because that only seems to have the stuff you like in it.”

“I want to make clear,” Kyl interjected, “to us, we look at that and we think there is revenue from these fees and other things of about $150 billion. And 60 percent of the health care savings comes from providers, not from beneficiaries. We believe that’s a real compromise.” The Republicans wanted health care savings to be replaced by increased co-payments from the beneficiaries, not cuts to providers, so business would not take the hit.

Addressing Kyl, Obama said, “Jon, hold on. The point I’m making is you guys got 70 percent of where we need to go, but nothing was agreed to till everything was agreed to.” Referring to the Biden group, he said, “You did not have a full package. It can start unraveling. The work has not been completed on balancing it out. If we have to do dollar for dollar, then without revenue, entitlements or OCO [Overseas Contingency Operations—funding for the wars in Afghanistan and Iraq], then that will be hard. Something has got to give. Eric, you said people want to talk jobs. But you said the fiscal situation is the most important thing to do. We weren’t asking you to vote on a tax
hike. We would’ve voted on maintaining the tax rates for 95 percent. You wouldn’t have had to take a vote. There has to be some give from you guys.”

The president was still pushing for decoupling. Boehner, Cantor and the other Republicans couldn’t believe it. Even the White House staffers realized that the president still saw it as his sword.

Cantor rebutted at length. “Our meetings in the Biden group were productive,” Cantor said sharply, defending himself, Biden and the others. “We could get to $2 to $2.3 trillion,” he said, referring to the $1.1 trillion in general spending cuts, $500 billion to $600 billion in entitlement and other cuts, plus $300 billion in interest and perhaps even some revenue. “We still have to work on caps and the control-type mechanisms. This is a viable option. What other choice do we have? You believe in more taxes. The vice president did say consistently that nothing was agreed to till everything was agreed to. We can talk all day long about who was right and who was wrong, but the bottom line is we have a blueprint in place we could use to build off of to get a deal.”

The White House team saw clearly that Cantor did not want to be responsible for scuttling a deal.

Biden turned to Boehner. “John, I believe you wanted a big deal, but you don’t have the votes. Absent revenues from Medicare and Medicaid, you can’t get something for dollar for dollar that can pass.” In addition to the $1.1 trillion in general spending caps, he said, here’s where we are: If we can get over $200 billion in revenues, then we’ll do $200 billion and Medicare and Medicaid. If $300 billion, then $300 billion. At the very end, though, if we can’t do that, we refrain from leading here.”

“The big deal doesn’t look so good now,” said Reid, undermining the president. He was upset that they were not counting the $1 trillion that the independent Congressional Budget Office counted for OCO. “Here’s what I resent: OCO is now apparently a piece of shit.”

“We always said we would do revenue neutrality,” said Cantor. “So don’t say we wouldn’t do revenues; we always said we’d do revenue neutrality.”

“Can we just go through the numbers?” Pelosi asked impatiently.

Cantor said $260 billion to $350 billion was available in health care savings.

“There’s no agreement on that,” Lew said.

“The whole package, revenue and offsets, then,” Biden replied, reaching very high, underscoring the necessity of revenue, “slightly over $2 trillion.”

“I want paper tomorrow,” Obama said. He wanted it spelled out in writing. What was real?

Lew joined Biden in pushing on revenue. “I can’t get to more than $2 trillion if you’re insisting on revenue neutrality,” he said. “We have to have the revenues to get to $2 trillion. And that’s even at the outer limit. $2 trillion is aggressive.”

“Okay,” Obama said, “well, $2 trillion. What happens after that in the second 10 years?”

He knew the answer. He had seen the charts with the trend lines. But Lew answered, “That’s $2 trillion for 10 years. Then what happens is the deficit path trends back up.”