The Price of Politics (38 page)

The speaker wanted to talk about options for avoiding default. How quickly could they pivot to the plan they were working on with Reid and McConnell?

There was a confidence level with them, Jackson said. And Pelosi and Hoyer would deliver enough Democrats, he was sure. “The president would, in the end, have to accept this,” Jackson said, “because when the congressional leaders say, Mr. President, this is what we can do, and the clock is ticking . . .” Well, it would be obvious. The president would have to give.

What about the trigger? Boehner asked. They had to come up with
a better trigger and figure out how it would work. In the end, that would be about trust, he said. Neither he nor Jackson was sure they trusted the president.

Keep working with the congressional leaders, Boehner told Jackson.

• • •

New York Times
reporter Jackie Calmes called Dan Pfeiffer, the White House communications director, to say she and her colleague Carl Hulse were about to post a piece on the
Times
website reporting that Obama and Boehner were near a $3 trillion deficit deal. The story was not precisely right, because it did not have the $800 billion potential revenue figure, and their reporting seemed to suggest there was not much revenue in the deal. Pfeiffer took the information to Bill Daley and the others.

“They can’t report that,” Daley said. “We’ve got to try to stop that.”

Pfeiffer said it was impossible to stop; the horse was out of the barn.

• • •

On Capitol Hill, Lew and Nabors didn’t have a chance to eat much of their lunch. They were accompanied by Plouffe because Harry Reid had wanted Obama’s top political adviser to see firsthand the building wrath among the senators.

The majority leader stood to introduce them.

“The White House is here to explain the deal that they cut with Boehner,” Reid said. “I don’t know anything about it.”

Nabors and Lew looked at each other in wonder. They had briefed Reid three days earlier. Reid had just thrown them to the wolves. As budget director, it was Lew they attacked most.

A band of angry Democratic senators, including former and likely future presidential candidates, cross-examined them on what kind of deal the president was trying to cut.
¹⁹⁰
Where was the revenue guarantee? Democrats had a winning hand, the public was with them on higher taxes on the rich. Why do we have to cut any Medicare? Don’t cut anything. You are playing on Republican turf. Talk of big spending
cuts was weak and played into Republican hands. This whole debate should be about revenue. Stare them down. Why were Senate Democrats cut out of the process? Force the Republicans to raise taxes on millionaires.

“You could raise all the taxes you want on millionaires,” Nabors made the mistake of saying, and it would never raise enough.

It was about symbolism, and the political bounce, several senators retorted. Clearly, the White House did not comprehend the dynamic.

“This needs to run through regular order,” Massachusetts Senator John Kerry, the onetime Democratic presidential nominee, said. “Let the committees do their business. Let the senators cut a deal. We can get there.”

During the meeting, the
New York Times
story popped up on the Internet. Headlined “Push Intensifies for Larger Deal on Debt Impasse,” the story said “new cracks were appearing among House Republicans.”
¹⁹¹
Boehner, it added, “has shown continued interest in a deal if it can be done in a way that emphasizes lower tax rates.”

Lew and Plouffe told the senators it was premature and not really true, but Plouffe was alarmed. The story would push Boehner further into a corner.

Lew was less than forthcoming about the actual deal because of the sensitivity of the negotiations—the situation could not have been more delicate—and he knew that the senators would speak to the media afterward.

When Lew was done, Senator Barbara Mikulski, the outspoken Maryland Democrat, said to the others, “I haven’t seen a meeting like this in my 35 years in Congress.”
¹⁹²

Reid was so angry that he talked to reporters off the Senate floor after the lunch, pleading for a deal with balance, fairness and necessary revenue.
¹⁹³
All the Senate Democrats agreed with that, he said. In a mildly threatening tone, he added, “Hope the president sticks with that, and I’m confident he will.”

Lew, Nabors and Plouffe returned to the White House and briefed Obama. It had been a rough meeting, as anticipated.

“It was just one of the more awful experiences of my life,” Nabors said.

“I’m glad it was you guys, not me,” Obama said.

• • •

In the wake of the
New York Times
story, Plouffe was trying to count votes in the House. He thought Nabors’s original estimate of 120 to 130 Democrats was too high. They would only get 70 Democrats now, he figured, so Boehner would have to come up with about 150 Republicans. That meant losing maybe 90—a big number for any leader. Whatever the count, they were dancing on a razor blade.

Nabors checked in with John Lawrence, Pelosi’s chief of staff. Lawrence, who had a Ph.D. in history and been with Pelosi since 2005, had known Nabors for years. They could cut to the chase.

“The only way this is going to work is if we—not jam it through—but we have to move quickly,” Nabors said. “Because if this thing sits out there, we’re just going to get picked apart a thousand different ways. We need to cut the deal, we need to break the arms we need to break. We need to get this thing passed and signed before people lock into positions that will tear the package apart.”

Democratic House members were responding to rumors, Lawrence said, because they didn’t have much information.

“Please don’t confirm or deny,” Nabors said, “please don’t let people lock into positions quite yet.”

As Nabors talked to a few members, his theme was simple. “Holy crap,” he said to one, “this is going to be really, really hard . . . 20 years of incredibly hard policy coming together in one package.” On the table were Clinton tax increases of 1994, Bush tax cuts of 2001 and 2003, and big potential changes in Medicare and Medicaid entitlements. Possible Postal Service reform, and the biggest change in federal employee retirement in decades. The pay of millions of federal workers had been frozen and now they were thinking of increasing their retirement contributions. It was a big deal.

One Democrat told Nabors, “Let me get this straight. We are giving up specific cuts to entitlements for the promise of getting revenue in
the future? If there’s going to be a process for revenue”—tax reform—“we want a process for entitlements.”

As Nabors traveled through the White House, especially the West Wing, the common question was, “Does this actually have a chance of happening?”

“The best indication that it has a chance of happening is that people are starting to panic,” Nabors answered.

• • •

Nabors and Sperling went to see the president again with good news about the earlier meeting with Boehner’s and Cantor’s staffs.

“Had you been in that meeting,” Sperling said, “you would’ve bet your house there was going to be a deal.” He had been doing these negotiations for 20 years. Both sides had been told by their principals to get a deal. “You can smell when people are trying to work it out. The bullshit goes away. It was just totally honest.”

The president, Nabors said, would have to reach agreement with Boehner on the big-ticket items—Medicare, Social Security, Medicaid and revenue. “Everything else is locked down. We could have this in the can in an hour.” It feels like a deal, he added. “So if Boehner calls, cut the deal because we’re ready to go on everything else.”

Yeah, the president said. Fine. They were in good shape.

• • •

For about a year the president had had discussions with Geithner about the overall fiscal picture.

“Geithner has two concerns,” the president later recalled. “He has an immediate concern about the catastrophe of a default on our debt.
¹⁹⁴
He also has a longer-term concern about the markets and their assessment of our debt. And those are—one is a very technical, immediate concern. And we’re having meetings every week about, okay, what’s worst-case scenarios? How do we manage this? He’s running fire drills inside of Treasury to figure out how long can they extend it.”

He and Geithner had come to agree strongly that they had to try to “break” the Republicans on revenue. Without more tax revenue
the administration would not be able to do much on infrastructure, education and other spending the president deemed essential for the economy and the country. While it was important for the president to demonstrate that he recognized the country had to live within its means and cut some spending, it was crucial to get that revenue.

Lew was all for increased revenue. There was no way to dance around the need for new, real revenue—not just through tax reform, but through tax increases. The unambiguous message from the Hill Democrats was that new, real revenue had to be in the deal.

So rather than wait, the president picked up the phone and called Boehner. It was time for a vote count discussion. In the end, that was all that mattered. Did they have the votes or not?

According to one senior White House aide who was in the room when the call was made and then heard the president’s description of Boehner’s end of the conversation, this is what happened:

“John,” Obama said, “this is going to be really tough.” How many votes do you need?

I don’t know, Boehner replied, it depends.

“If you need a decent number of Democratic votes,” the president said, “we may need more revenue, in the $400 billion range.” I’d like you to consider it.

Nabors had floated it but now the president was asking the speaker. “I really think that could help us get the number of votes that we need.”

If they needed a lot of Democrats, Obama said, “I can’t have the Gang of Six”—with their proposal for at least $1.2 trillion in revenue—“to the left of me.”

Boehner agreed that would be hard for the president. But as he had said the night before, his neck was out about as far as it could go.

“If you can’t,” Obama said, “I understand. Come back to me. We’ll figure out another way. Maybe there’s another way we can lighten the Democrats’ load to get some more votes.” If the additional $400 billion was not possible, Obama said, “then we are going to have to look at the entire package.” That meant, he said, “We’re just going to have to look at the entitlements and we’ll obviously keep most of what’s
in there.” He was committed to the major entitlement cuts. “But we might have to dial some of that back a little bit.”

The president said he was confident that the Democratic leaders, Reid and Pelosi, would go along. “I can get Nancy and Harry to be for this.”

Boehner was skeptical. Reid was definitely in a different place. Keeping his options open, the speaker gave a vague response, along the lines of we should keep in touch.

“So think about it,” the president said, “come back. And if it doesn’t work for you, let’s talk again. Get back to me.”

Obama had just had one of the most important conversations of his presidency—one that he and Boehner later remembered very differently.

In an interview, Boehner, who was consulting notes of his discussion with Obama, vehemently disputed the White House version, saying that the president absolutely insisted on $400 billion more in revenue.
¹⁹⁵

The Boehner version: “Then Obama finally calls me on Thursday and wants $400 billion more. I said, ‘Mr. President, we’ve had this conversation now for a month. You know there’s not a dime more on the table.’ ”

The president’s response, “I have to have $400 billion more. I have to have $400 billion more.”

“I said, ‘Mr. President, it just isn’t going to happen. No.’ ”

The president, according to Boehner, said three times, “I want you to think about it.”

“So, I said okay.”

According to Boehner, “We had a deal. That was the real shocker.” He said he reminded Obama that they had met at the White House four days earlier. ‘Mr. President, remember Sunday? We have a deal.’ ” Boehner said the president kept pushing and saying, “I‘ve got to have more revenue. Got to have more revenue. I need $400 billion more.”

Boehner added, “I pushed back a couple of times, because he knew there was not an extra dime on the table. But he was also, I’m sure, getting a hell of a lot of heat from Reid and Pelosi. And so, I understood
the pressure he was under. But hell, I knew the damn pressure I was under.”

I reminded him that the president later said he only asked that the $400 billion be considered and had not demanded it.

“No, no, no,” Boehner said. “Hold on. No, no, no. No. No. I
need
$400 billion more revenue. I
need
. And I pushed back a couple of times. And he said, ‘No, no, I need $400 billion more. You need to think about this.’ I said, ‘Okay, I will think about it.’ And the president said, ‘Call me back.’ It was pretty clear to me then that he was blowing this thing up, and we’d better figure out what Plan B is.

“I immediately picked up the phone and called McConnell,” Boehner said. He said he told the Senate minority leader, “We better be thinking about Plan B here.”

Boehner summarized his view, “If you’re going to drop your dance partner, you’d better make sure you’ve got another one. But understand, I did not want to get to August 2nd without an agreement.” He added, “Eric and I believed we get past August 2nd, our leverage decreases, not increases.”

• • •

Obama later told me that he presented the speaker with choices rather than a demand.
¹⁹⁶

“At this point, Boehner and I, we’ve been talking a lot. We’ve been having a good discussion. And we think we’re coming close to a deal. But now the question of votes is starting to come up. The Gang of Six has made its announcement. It’s gotten a lot of attention.

“I say to John, here’s the situation. You are going to need some Democratic votes to get this passed, no matter what. And at $800 billion, it is going to be hard to get the kind of Democratic votes that you may need to pass this through the House. And so if you are prepared to go up to $1.2 trillion, which matches more or less what the Gang of Six has talked about, we can probably get more Democratic votes. If not, you’ll probably get fewer Democratic votes. So you need to give me a sense of, how many votes do you think you need for a deal? How many votes do you need to get this through? And based on that, we’ll
have to calibrate what we can do on my side. So get back to me, and let me know.