The Price of Politics (29 page)

“Eric,” Obama chided, “it looks like there’s a page missing: revenue.”

“If you feel you need revenue,” Cantor replied, “then just offset it somewhere else.”

“How about the payroll tax cut as an offset?” Obama said enticingly. “You don’t have to answer that now.” In his secret offer five days earlier, Boehner had proposed extending it another year. The payroll tax cut was popular with both Republicans and Democrats. It reduced taxes for all workers. The only problem was that it added to the deficit.

“Let me do some rough math here,” the president said. “If you take health care mandatories that don’t fall on the beneficiary, with the possible exception of means testing—which Pelosi and Reid have said they will oppose—plus other mandatory, plus discretionary, you’re at $1.4 to $1.5 trillion. I warned you about this. But maybe I wasn’t explicitly clear. You came in on the high end and presupposed the high end on all your numbers. So I’m going to take the lower end. I want you to listen to me.”

Obama totaled up to “a little under a trillion,” and saw how they could get to $1.7 trillion with interest savings and the $1 trillion general
spending cap. In budgeting, CBO allowed them to count interest that would be saved by not having the debt. Interest savings generally were calculated to be 20 percent of the debt savings. “If no revenue, then you can’t get to” $2.4 trillion. “I don’t know how you’re going to do it without going to revenue. That’s the reason why the big deal is better.”

Obama went on. They might need $2.7 trillion in the debt ceiling to take them beyond the next year, the election year. Since the speaker insisted on at least equivalent cuts, dollar for dollar, they were not going to get there. “Either we’re going to do less than $2.4, $2.5 trillion in cuts, so we’re not doing dollar for dollar, or we’re going to go back to the big deal. But this isn’t just about politics. Imagine doing this in the middle of a presidential race?” He added, “So I want you all to go back to your caucuses and figure this out. We can probably get to $1.7 or $1.8 when you include interest, but that’s as high as we’re going to get.”

Obama, the precise technocrat, returned to his talking point. “Why aren’t we asking more of the people who are making the most?”

“We ought to be clear that spending is the big problem,” Boehner said. “Even if we wanted to, we couldn’t take it all from the rich. No one here is jumping to cut Medicare.”

“You already did,” Obama replied, referring to the House Ryan budget.

“Excuse us for leading!” the speaker snapped.

“I didn’t intend to get us started on a debate on taxes,” said Obama, who had opened the subject. “What I’m saying is we’re at $1.7, maybe $1.8. We still have to resolve the firewall, the Doc Fix and Pell. We agreed to a trillion [on discretionary] but that’s about all the traffic will bear.”

Looking ahead to the next day’s meeting, he said, “We need to go back and figure this out. Everyone needs to give me specific ideas on how to move forward.”

“We’re nowhere near agreement here,” Reid said. “I think we need to do a commission with an expedited approval process.”

Addressing the Republicans, Biden said, “You keep saying it’s possible to do revenue if neutral.” How was Pelosi, he asked, supposed to do that with her Democrats?

Ignoring the question, Cantor replied, “We’ve got to get through this and start talking about jobs.”

“If we’re cutting spending,” Obama said, “that doesn’t have anything to do with jobs. We lost half a million jobs in the public sector, and if we hadn’t put the [stimulus] money in, unemployment would be higher.” Instead of being 9.2 percent we’d be half a percent higher, he maintained. “We can have the macroeconomic debate at some other point,” he said, postponing discussion over whether the stimulus money had worked to boost the economy.
*

“What is fair?” Biden asked. They could get at least $100 billion from the wealthy with tax increases. “No economist will say that will impact jobs. So what you guys have here is a political problem. Harry’s saying he can’t get this deal done.”

“Give me something,” Reid pleaded. “Give me $250 billion in revenue.”

Oh, no, the speaker said, “We’ve seen that before. The tax increases are immediate and the cuts never happen.”

Pelosi said, “You’ve made a real commitment here to be the president, Mr. President,” to lead and do the negotiations yourself. In the Bush administration, during the financial crisis and bailout at the end of 2008, Bush had been much less involved. “The White House wouldn’t even let me call the president,” Pelosi said. “I mean, I love President Bush,” she said. “I actually sent him flowers for his birthday, and I called him and I thanked him” after Osama bin Laden was killed. To Obama, she said, “But you, Mr. President, you listen to all sides.”

“I only get to $803 billion,” said Hoyer, after making some calculations.

“Listen,” Obama said, “we haven’t agreed to anything.”

“Well,” Hoyer said, “I certainly haven’t agreed on $1.7.”

“I was only speaking for myself,” the president replied.

“We’re no closer to an agreement,” McConnell summarized.

• • •

That evening by 8:30,
Politico
had an article on its website headlined “Cantor Ascends as GOP Voice.”
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The debt limit talks with Obama had placed Cantor in the spotlight, center stage, as he made the Republican presentation, the article said. “Cantor has gracefully positioned himself as a guardian of the conservative line while Boehner worked to find the kind of shared-sacrifice deal Obama wants.”

T
he next morning, July 12, Boehner spoke with reporters. Wearing a gray suit and an eye-catching lime green tie, he publicly stuck his finger in Obama’s eye.

“Republicans have a plan,” he said.
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“We passed our budget back in the spring, outlined our priorities. Where’s the president’s plan? When’s he going to lay his cards on the table?
The debt limit increase is his problem.
” He reiterated his position—spending cuts larger than the increase in the debt ceiling, no tax increases, and real control on future spending.

Noting that he had been in conversations and meetings with the president, Boehner said, “The president talks a good game, but when it comes time to actually putting these issues on the table, making decisions, he can’t quite pull the trigger.”

McConnell pulled no punches on the Senate floor that afternoon, declaring the president guilty of “deliberate deception” by taking what should be a deficit and spending debate and now insisting on more taxes.
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Sounding as though he was suggesting a coup, McConnell praised Biden as “a man I’ve come to respect as a straight-shooting negotiator.” But, he said, as long as Obama remained president, “a real solution is unattainable.”

• • •

That afternoon, CBS News released excerpts of an interview with Obama that would be aired on the evening news.

In response to a question about what would happen to Social Security benefits if Republicans and Democrats could not come to a deal on the debt limit increase, the president said, “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue, because there may simply not be the money in the coffers to do it.”
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Asked about his relationship with the speaker, the president said he liked Boehner personally.
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“I think John would like to do the right thing.”

Did he trust Boehner?

“I do trust that when John tells me something, he means it. I think that his challenge right now is inside his caucus.”

The president criticized Congress for delaying action on the debt limit and other matters until conditions reached a crisis.

He was asked for his reaction to McConnell’s statement that no deal was possible while he remained in the White House.

“Well, then he’s going to have to explain to me how it is that we’re going to avoid default, because I’m going to be president for at least another year and a half.
¹⁵³
And I don’t think the American people would expect that the leader of the Republican Party in the Senate would simply say that we’re not going to do business with the president of the United States.”

• • •

At 3:55 that afternoon, the president convened the closed-door meeting at the White House with the congressional leaders. “John,” Obama began, “you said this is my problem. I would be happy for it to be my problem if I didn’t need votes in the House and Senate.
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As this concerns all of us, we all have a problem. I continue to believe that we ought to be able to do, we ought to take the approach of doing something big. Raising dollar for dollar to deficit reduction is a constraint.
This is also a constraint on Nancy and Harry if we can’t do revenue. We’re at $1.6 to $1.7 to $1.8. What is it people think they can do?”

Geithner had some words of warning. In Europe, he began, “there’s been a big escalation in panic. It’s spreading through Greece, Ireland, Portugal. Italy’s seen a big increase in the price of default insurance on their debt. Bank stocks are down 25 percent. They’re nowhere close in Europe to a viable strategy.” In the United States, he said, “Rating agencies are looking at, one, the risk that Congress fails to raise the debt limit, and, two, the shape and contour of the fiscal restraints. If there’s no clear path maybe this week, then we’re going to be put on negative outlook or watch, downgrade if we don’t act by August 2.” They would be kept “negative” if they didn’t deal with the fiscal problems.

“Europe’s a bigger problem with many fronts,” Obama said. The financial markets need some solid underpinnings, and symbolic votes in a show of party solidarity were dangerous.

“Default is not an option,” McConnell said. “We should be reassuring the markets of that.”

Neither he nor Obama addressed McConnell’s assertion earlier that day on the Senate floor that the president was guilty of “deliberate deception.”
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McConnell then introduced a proposal to put the entire burden of raising the debt ceiling on the president. His complicated idea was that Obama should first raise the debt limit on his own authority, and then Congress would pass legislation disapproving of the increase. The president would then veto that legislation, but the Democrats would have enough votes to sustain the veto so the debt ceiling would be increased.

It was confusing and complex—but similar structures had been used in the past to provide legislators with political cover for difficult votes.

Some in the White House saw McConnell’s proposal as a realistic approach to a thorny political problem. After the meeting Jason Furman, Sperling’s chief deputy, sent an email to Rohit Kumar, who had helped devise McConnell’s scheme. He jokingly thanked Kumar, on
his wife’s behalf, for his positive contribution to the discussion. His wife’s birthday was coming up, Furman said, and he was worried he would miss the celebration if the debt limit battle dragged on too long.

For his part, McConnell was direct about the thinking behind the proposal to make the president the sole person responsible for raising the debt ceiling.
¹⁵⁶

“I decided to make him own it,” McConnell said in an interview. “We thought he ought to own it. It’s part of my job to protect my members, if I can, against having to vote for it.”

Boehner returned to the issue of whose problem it was. “I feel like I need to defend myself,” he said. “Tim [Geithner] sent me a letter two days after I was sworn in as speaker talking about the need to raise the debt limit. No one wants to vote to raise the debt limit. You requested it. We said cuts, not taxes, and controls on spending. What is your plan that you want us to pass?”

“John,” Obama replied, “as we’ve discussed . . .” Lew and the White House congressional liaison have been “sitting with your guys. I want the biggest plan possible. Revenue, entitlements, discretionary. We’ve been talking about revenue changes or revenue neutral, payroll tax cuts, $120 billion. That’s $1,000 per family.”

“How far are you willing to go on structural entitlement changes?” Boehner asked.

“We would not be prepared to do some hard things on entitlements if we don’t get net positive on revenue,” Obama said.

Suggesting he had read something in the newspapers, he added, “Mitch has been clear on the revenue issue about not raising taxes. So the conclusion I accept is you do not accept net positive revenue.”

“Is that correct?” Biden asked.

“Yes,” Cantor replied. He had been saying it—and meaning it—forever.

Boehner had a qualifier. “If the deal was big enough, we could talk about entitlements, corporate tax reform and individual tax reform,” he said.

When Boehner said he was open to a big deal, Plouffe glanced at Cantor. The majority leader was staring angrily at the speaker.

The disconnect between Boehner and Cantor was a topic of conversation among White House staff. The tension was so obvious, Nabors joked, that he felt awkward being in the same room with the two of them.

To Sperling and the rest of the White House team it couldn’t have been clearer. Cantor was a firm “No,” Boehner a qualified “Yes.”