The Price of Politics (34 page)

The issue of a trigger unresolved, they moved on to additional
spending cuts. The White House wanted to halve Boehner’s $220 billion in proposed cuts to other health programs to $110 billion. The White House was willing to apply the modified Consumer Price Index to Social Security and other programs.

Boehner found the new White House offer on revenue of $800 billion as a minimum, or floor, unacceptable. He had previously made it a ceiling, meaning they could do less.

“We need some wiggle room to be able to sell this to our guys,” the speaker said. “We need some flexibility to produce tax reform. We really need this to be a ceiling.”

“I think we can do that,” Geithner said.

Boehner said he wanted to maintain the lower rates on capital gains and dividends.

“That just hits too many of our people right between the eyes,” Geithner said.

When the discussion turned to corporate tax reform, Boehner and Cantor thought they were onto something positive. The administration had tentatively—everything was tentative, it seemed—stated that corporations would only be taxed on domestic income and not from overseas income. This was a giant issue for companies like Apple, Microsoft and Google, any that operated abroad. Called a territorial corporate tax system, the business community would be overjoyed if it was adopted in an overhaul of corporate taxes. Not having to pay the U.S. corporate rate of 35 percent on overseas income would be a bonanza for corporate America.

“The goal is territorial,” Geithner said, starting to pull back. “I’m not sure we can commit to completely territorial.” Maybe 95 or 96 percent. He added pointedly, “We are prepared to move off decades of Democratic orthodoxies.”

Treasury had been working on a corporate tax reform plan for some time. Decisions had been expected earlier in the year.

Where are you? they asked.

“Well,” Geithner said, “we’re still working. But complete territorial we may not be able to get. But we’re going to get close, and we can work with you on that.”

Nabors said that the president would just not do $200 billion on Medicaid. As they had said before, that would gut the program. It was achieving a policy outcome through radical cuts in funding. “We’re not doing that,” he said. He also had a table of $243 billion in cuts on 14 programs ranging from civilian and military retirement to agriculture subsidies. If they were going to sell a deal to Democrats, he said, these needed to be part of the package. They reflected the agreements reached in the Biden meetings. They couldn’t have 14 negotiations, Nabors said. “We’re not negotiating on the cuts, just agree to these cuts.”

Then, unexpectedly, in walked the president. “How are you guys doing in here?” he asked. “You making progress? I was just at church.”

Obama, in a suit and tie, struck a sharp contrast to the others, who had shown up for the Sunday session in khakis and blazers. Daley gave a status report that was slightly more positive than negative.

“Let me talk to John and Eric alone,” Obama said.

The others wondered if they should leave. It was an awkward moment.

“We’ll go down to my office,” the president said, leading the two leaders to the Oval Office.

• • •

The president would later recall that he was pleased to see Cantor there.
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It was “a good move by John” he said, “to bring Cantor in so that he could feel some ownership, but also because he was probably closer to a certain wing of his caucus. And so I was glad to have him participate.”

Stombres and Bradley, Cantor’s top aides, had earlier expressed their concern to their boss that the president was bringing him into the discussions only to get him invested in the process. Beware of some kind of pre-sealed deal Obama might slap down on the table and urge you to sign. Don’t make any deals. Step out. Say you have to make a phone call. Don’t get railroaded.

Now, in the Oval Office, Cantor told the president and Boehner that while he wanted to see if something could be done on a big scale, he had doubts, grave doubts, that he and the speaker had the capacity to sell something that would be perceived as a tax increase by their members. Cantor thought the president was saying in effect, you are the impediment here. I know I could get a deal with the speaker.

Boehner pushed. He wanted a deal. With $800 billion as the revenue figure, he said, even if our guys hate it, we can get it passed and cure all sins with robust tax reform.

Cantor thought the speaker had symptoms of deal fever.

Faced with both Obama and Boehner, Cantor said it would be a hard sell to their members, so it had to be made as easy as possible. In other words, “the best worst big deal possible.”

Boehner later recalled, “We have an outline of a deal. It’s done.”

• • •

Meanwhile, in Daley’s office, the House Republican senior staffers sat with their Democratic counterparts, eating muffins and watching the British Open golf championship on television.

After about 20 minutes, Boehner and Cantor returned. The speaker had just opened a door that led to a small outdoor patio, apparently intending to have a cigarette, when the president unexpectedly returned. Boehner stayed outside the door and lit up while the president spoke.

“I just talked to John and Eric and I think we’re in a really good place here,” he said. “We need to start thinking about how we put this thing together.” How long will it take to get this drafted? He was looking at Geithner, but before Geithner could answer, he asked, “How much time do we have before we reach the limit?”

As of August 2, Geithner said, the Treasury would no longer be able to borrow money.

“Now,” the president said, “this is going to be very tricky for us because you know the press will be climbing all over us. We may be speaking one language to our people.” The Republicans would be speaking their language to their people. “And as stuff gets out it’s going to make things very difficult for us. So we’ve got to keep this
real quiet. My guys are under instructions not to say a word about any of this. We need to get this done, locked down and rolled out.”

• • •

“I got ’em,” said Boehner, on the ride back to the Capitol in his official car, running red lights and speeding through the empty streets of Washington. “I think if we give on the debt limit and go to a trigger—a policy trigger instead of a debt limit trigger—we’ll get them on everything else,” he told his aides. He was willing to do that. Get Cantor to my office as soon as possible.

In an interview later, Boehner said, “We’re there.
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Now we’ve still got to figure out what the trigger is, so that if tax reform doesn’t happen, you’ve got to have a big enough trigger behind it.”

Boehner emphasized the importance of the trigger. “It had to be ugly enough where nobody would go there, so we’d get tax reform done. I knew we couldn’t have decoupling or other crazy things in there.”

• • •

Cantor left the White House with Stombres and Bradley.

It was crunch time, he told them, and it showed. He looked as though the weight of the world was on his shoulders. If they—meaning mostly he—screwed this up, it could be a disaster. If he or the speaker blew it up again, they risked being seen as unreasonable, going to the brink of a deal and then walking, yet again. He could see the headlines: There would be a big deal with tax reform if not for these crazy Republicans led by Eric Cantor. On the other hand, agreeing to a bad deal or one that the Republican members would choke on could be worse. “Can this work?” he asked. “Can this really work?”

One reality was his relationship with the speaker. In the House hierarchy, Cantor was the subordinate. But he was also the one plugged into the members, and that was why Obama and Boehner tolerated his presence, barely.

The deal was hanging by the thinnest thread. And so was he.

• • •

In an interview, the president recalled that after the Oval Office meeting with Boehner and Cantor, “What we have is a framework, not an agreement,” he said.
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“I have to say that Boehner could not have thought at that point that we had a deal. And the reason is—and I’ll just give you one example—the principles of tax reform were completely unsettled. And I was always suspicious of the notion that tax reform, without an actual identification of where the revenues were going to come from, would be real enough for me to be able to extract what are very real changes to entitlement programs. And so I can’t sell that.

“If Cantor’s reading is we didn’t have a deal yet, it’s more accurate than John’s. And frankly, we did not indicate to him that we had a deal. We were optimistic, though, at that point that we could get a deal done. I mean, I think that the last—when he leaves our office, I think the basic view is, you know what? This can get done. Here’s a framework that can work. We’ve got to work out all these details and get an agreement.

“At this point, I’m probably feeling better than 50–50 that we’d get this done. And I feel sufficiently good about the prospect of getting it done that I start saying to my team, we’ve got to do some additional consultations with the House and Senate Democratic leadership. Because it is important that they don’t start feeling blindsided.”

• • •

Back at the Capitol, Cantor told his staff he had to make a sincere effort with the members. How the hell are we going to sell this? How can we get our members to support this? He couldn’t get too far ahead of them.

“Where is Paul Ryan going to be on this?” Cantor asked his aides as they rode back to the Capitol. “What’s he going to say?”

Ryan would understand the numbers, Stombres said, and the $800 billion looked conveniently, suspiciously, like the revenue from the expiration of the top Bush rates. Ryan’s first question would be: “What have you committed us to? Have we committed to really bad policy that we can’t support?” His second would be: “What have you locked
us into going forward? Have you put us in an impossible position where we’re damned if we do, damned if we don’t?”

Ryan would worry that all this short-term deal making would retard the real cause: addressing the “real problem,” as they called it, of runaway, unsustainable entitlement spending.

They all knew tax reform would take six months to a year or more to work out and negotiate. A complete or even partial transformation of the tax code, larded with decades of special interest provisions, was a monumental task. If a deal was reached and announced on the basis of tax reform, what would be the enforcement mechanism or trigger that would go off if tax reform did not work?

All the talk, Stombres said, would ultimately come back to that. The trigger would be make or break.

Yeah, Cantor agreed, returning to his own personal problem. He was living in a political no-man’s-land among the largest political forces in the country—Obama, Boehner and the House Republican majority. He felt like one of those stretchable rubber dolls. Obama and Boehner had one arm and his 240-member conference had the other. “I want to find the exact spot where both arms don’t get ripped off,” he said.

• • •

In the early afternoon, Cantor, Stombres and Bradley went to the speaker’s office.

Boehner was positive, optimistic as always about what they were working out. We are going to describe the deal this way, he said. Income tax brackets would be collapsed into three rates, no more. The White House had agreed. No rate would be higher than the current 35 percent. The White House had agreed. Efficiencies in the tax code and economic growth would lead to lower tax rates. The corporate rate was going lower.

“They can’t say that Boehner is raising taxes by $800 billion,” Jackson said.

Don’t worry if it is received poorly at first by the members, Boehner said, we’ll fix it with tax reform.

Well, let’s see exactly what “it” was, Cantor said. After all the talk with the White House, they would see “it” differently. Let’s get precise details. The speaker agreed. Also, they agreed that if there was going to be revenue in a trigger, the White House would have to agree to an Obamacare trigger. Brett Loper, Boehner’s policy chief, and Neil Bradley were directed to capture the details on paper, make sure they were all comfortable with them, and then send them to the White House.

“Let’s see what they come back with,” Cantor said. One thing was for sure, the White House would have a different take and spin on the conversations.

So, Loper and Bradley drafted a proposal that stuck close to many of Boehner’s original positions, but added a clause allowing for an unspecified trigger made up of spending cuts and revenue increases. Obama would get his full debt limit increase, up to $1.2 trillion right away with an additional $1.3 trillion available through McConnell’s convoluted approval/disapproval process.

Cantor went upstairs to his office with Stombres and Bradley. Tax reform cures all sins? It was daunting to say the least, they agreed.

At 7 p.m., Loper sent a three-page offer to the White House.
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It gave a $2.5 trillion debt extension under McConnell’s scheme. The trigger was “specific spending reductions and revenue increases.” But, it noted, “further discussions necessary to finalize.”

The White House said they could expect a detailed reply waiting in their email inboxes on Monday morning.

• • •

Boehner and Jackson discussed where they thought they really were. Obviously there were some worries about where they would get the votes for a deal. But Boehner believed that if he and the president agreed on something, they would get the votes. Joining together, going out, standing together, declaring publicly they had a deal, he said, would generate momentum.

“The president,” Jackson said, “is supremely confident in his ability to deliver. You can’t be president of the United States without having that sense of yourself.” Once a deal was announced, Obama
would have no choice but to rally whatever Democratic votes would be needed. Obama couldn’t sign on and let it fail. He would be forced to use the power of his office to get the votes.

Boehner knew he was in the same position. He too would have to use the power of his office to rally the House Republicans as he had never before.