The Price of Politics (45 page)

Boehner called for real spending cuts and decried the Reid proposal as “filled with phony accounting and Washington gimmicks.” There was no stalemate, and the House had a plan that he expected to pass and send to the Senate and the president.

Reid insisted his plan was the only option that the president might approve. “This isn’t a game of chicken,” he told reporters that night.
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“This is a game of reality. We’re about to go over the cliff.”

• • •

“The debt limit vote sucks,” Eric Cantor admitted.
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He was addressing a closed meeting of the Republican conference at the Capitol Hill Club on Tuesday, July 26. Cantor told the members that, while they might not like the Boehner plan to raise the debt limit, the alternatives—the plan being pushed by Reid or outright default—were far worse.

So, he said, members needed to “stop grumbling and whining and to come together as conservatives” in support of the speaker.

“This is a different fight now,” Kevin McCarthy, the whip, said. “This is a much bigger fight. This defines who wins or loses. The whole nation is watching. The president is afraid of this bill. That’s because in the end, this will
be
the bill.”

McCarthy, a movie fan, had the lights dimmed. A short clip from the 2010 Boston crime drama and box office hit
The Town
appeared:

Ben Affleck: “I need your help. I can’t tell you what it is. You can never ask me about it later. And we’re going to hurt some people.”

Jeremy Renner: Pauses and then, “Whose car are we gonna take?”

The Republicans roared their approval. But the speaker did not have their votes. Not even half of the 218, McCarthy reported.

Boehner’s Budget Control Act, with a vote on the House floor scheduled for that day, faced significant resistance from the far right wing of the Republican conference. Many members elected with Tea Party support were saying they would not vote for a debt extension.

Later that day, the White House issued a warning that fell just short of a veto threat: “The president’s senior advisers would recommend that he veto this bill.”
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Pelosi and Hoyer made public statements of support for the Reid proposal, and took all 193 House Democrats with them, which left Boehner scrambling to find 218 votes from the 240-member Republican conference. His job became more difficult that afternoon when the Congressional Budget Office reported the Budget Control Act would save not the $1 trillion Boehner had promised, but only $850 billion.
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The combination of lack of Democratic support, resistance from Tea Party Republicans, and the CBO report forced Boehner to pull the bill off the floor rather than face a losing vote.

• • •

“Get your ass in line,” Boehner told the House Republican conference in a closed-door meeting the next morning, Wednesday July 27. “I didn’t put my neck on the line and go toe-to-toe with Obama to not have an army behind me.”

Pulling the Budget Control Act from the floor the day before had been an embarrassment the speaker did not intend to repeat. Boehner and the rest of the Republican leadership spent the day furiously whipping votes, but were unable to get to 218, and Boehner pulled it again.

• • •

“The president,” Biden told Pelosi, “is becoming increasingly fixated on this idea that Congress can hold him hostage anytime they want.” Yes, they needed to compromise. “But instead of making it look like we are being held hostage we just have to change public opinion about what’s happening here.” They needed to identify the problem. “We have to get people to turn against the Republicans.”

• • •

At 2:30 p.m. Lew and Nabors went to the Senate to meet with Reid and his chief of staff, David Krone.

“We have an idea for the trigger,” Lew said.

“What’s the idea?” Reid asked skeptically.

“Sequestration.”

Reid bent down and put his head between his knees, almost as if he were going to throw up or was having a heart attack. He sat back up and looked at the ceiling. “A couple of weeks ago,” he said, “my staff said to me that there is one more possibile” enforcement mechanism: sequestration. He said he told them, “Get the hell out of here. That’s insane. The White House surely will come up with a plan that will save the day. And you come to me with sequestration?”

Well, it could work, Lew and Nabors explained.

What would the impact be?

They would design it so that half the threatened cuts would be from the Defense Department.

“I like that,” Reid said. “That’s good. It doesn’t touch Medicaid or Medicare, does it?”

It actually does touch Medicare, they replied.

“How does it touch Medicare?”

It depends, they said. There’s versions with 2 percent cuts, and there’s versions with 4 percent cuts.

“I can’t do that.”

Once they started pulling things out of the sequester, they would never be able to stop. The idea was to make all the threatened cuts so
unthinkable and onerous that the supercommittee would do its work and come up with its own deficit reduction plan.

Lew and Nabors went through a laundry list of programs that would face cuts.

“This is ridiculous,” Reid said.

That’s the beauty of a sequester, they said, it’s so ridiculous that no one ever wants it to happen. It was the bomb that no one wanted to drop. It actually would be an action-forcing event.

“I get it,” Reid said finally.

• • •

At 5 p.m. Thursday, July 28, Geithner appeared in the Oval Office with two senior aides. They had come to lay out the latest update on how they would handle a default and what it might mean.

A team at Treasury had been working steadily to try to understand the implications of a U.S. default. Some called their work “The Armageddon Project.”

Geithner did not look so young anymore. He sounded like a general warning that the battle was coming and they were going to take heavy casualties. A U.S. default would be a first. A perfect credit rating, like virginity, couldn’t be restored once it was lost. Going forward, American creditworthiness would bear the scar of default as long as the United States existed.

Cass Sunstein, the Harvard Law professor and Constitutional scholar who headed Obama’s regulatory office in the White House, had been invited to offer his views on whether the 14th Amendment offered a way out of the crisis. The amendment reads, “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.” The issue was the phrase “authorized by law.” Could the Treasury issue bonds that pushed the United States past its debt limit? It was not clear but everyone—including the other Constitutional law professor in the room—agreed it would not work. There would be lawsuits. The new bonds would be immediately downgraded. It would be a mess.

Mr. President, Geithner said, there are no more options left. The
details were sickening. The federal accounts will be dry next week. He could sell assets, property, buildings, you name it, but it would look like a fire sale. He could delay some payments, juggle and shuffle. But all this would look like semi-default, which might be as bad. Even the perception of a U.S. default would change things permanently.

The economy was already weakening. What would happen in the markets? What would it do to job creation? Unemployment? Consumer confidence? Overall confidence? The moral authority of the government? The moral authority of the president? “Catastrophic,” Geithner said.

The treasury secretary said he had a bottom line: A default could trigger not just a recession but a depression, one worse than the Great Depression of the 1930s.

One participant arched back in his seat, threw his head up and stared at the ceiling.

Plouffe found the projections harrowing. If that was his reaction, he wondered, how acutely was the president feeling it? As best Plouffe could tell, it was as if Obama had been seared.

A number of those in the Oval Office that day felt their stomachs turn to knots.

• • •

In an interview, Obama later said he had recognized that the stakes were high, which was why he and his advisers rejected ideas such as the 14th Amendment option.
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“I am not prepared to put the country in a position in which a miscalculation results in default. And I think that one of the major arguments that would be lodged against us later was this notion that we gave leverage away. That we should have been prepared to say, we’ll do this in the 14th Amendment route, and so forth,” he said.

“And what I would have to explain to my folks is that the world financial markets, having already gone through trauma two years earlier, cannot afford to have uncertainty about what the world’s reserve currency and its Treasury notes are worth in this environment.”

• • •

Boehner brought his plan to the House floor again that afternoon. After nearly two hours of debate, which was supposed to culminate in a vote, House leadership abruptly shifted gears. At about 6 p.m., the House unexpectedly took up a series of bills to rename post offices.

Behind the scenes, Boehner had determined that he was still short of votes. It was down to 10 or 15 members who were resisting. The speaker pulled some of the most conservative members of the House into his second-floor offices for a late-night meeting. But only minutes after walking in, several of the members walked out.

We’re going to the chapel to pray for our leaders, two of them told waiting reporters.
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Shortly before 11 p.m., without voting on Boehner’s bill, the House went into recess.

B
y Friday, July 29, Boehner was desperate. He was three votes short. He met with about a dozen House freshmen who were voting no. In exchange for their yes votes, they wanted a provision that made the second step of the debt limit increase contingent on both the House and Senate not just voting on, but passing a Constitutional amendment requiring a balanced budget. Okay, the speaker agreed, and brought the bill to the floor. It finally passed 218–210.
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A clearly frustrated Boehner said after the vote, “I would say we tried our level best.
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We’ve done everything we can to find a commonsense solution that could pass both houses of Congress and end this crisis. . . . But some people continue to say no.”

Where was the White House? he asked. Where was the Senate? He demanded they “put something on the table! Tell us where you are!”

Two hours later, the House bill was brought up in the Senate, where it was promptly tabled—meaning its chances of reaching the floor for a vote were slim.

• • •

What’s next? Obama asked in a call to Boehner. I think we should meet.

Boehner wasn’t interested. He said he would have Barry Jackson contact Nabors.

Jackson found that every time they went to the White House the result was unproductive. He took comfort from the fact that David Krone agreed with him. It was a pattern. Obama always wanted the principals to get in a room. It was another sign of the president’s inexperience, Jackson believed. Putting the president and the speaker in a room together just increased the pressure. It was now down to detail. If Obama wanted to negotiate, he should send something in writing.

So Jackson called Nabors.

A meeting would not be productive, Jackson said, unless you send over a proposal.

We will, Nabors replied.

• • •

Rohit Kumar, McConnell’s most senior policy adviser, went home about 8 p.m. Friday night, July 29.

“What are you doing here?” his wife, Hilary, asked. It was almost as if she was asking, Who are you? Are we still married? She had barely seen him during his past month of late nights and weekends. He’d often been rising before anyone, and arriving home after everyone was in bed.

“The fact that I’m here at eight o’clock,” he said, “tells you how screwed we are. We’re nowhere. We have no deal. I don’t see how we get one.” There was no path to a deal, he told her. Everyone was dug in. No one was moving; no one was blinking.

• • •

At the White House two hours later, 10 p.m., Daley, Lew, Nabors, Plouffe, Geithner and Dan Pfeiffer, the communications director, had not gone home. Daley called them to his corner office. The president was up in the residence.

Everyone was exhausted, wrung out, sleepless. It was so bad that at one point during the endless weeks of negotiations Lew had stayed at
the office working until 6 a.m., gone home to shower and change, and been back at his desk by 7:30 a.m.

The situation was grim. The House Republicans had finally—after a week-long debacle—passed their bill. The group in Daley’s office thought the final product was so ridiculous that it had no chance of passing the Senate.

But Nabors knew that there was a chance the Senate Democrats would fold, because the fastest solution would be to pass the House bill and get out of town. The House bill had the second debt ceiling vote, which was the president’s final red line, and Reid had been wobbly on that issue. The subject for discussion: Would the president really veto a two-step process as he had promised? Was there an alternative?