The Price of Politics (49 page)

“We’re not compromising on the firewall,” Biden told Pelosi in a phone call. She then told the president it could be a problem but it would not be a deal breaker.

Pfeiffer, an unnerving presence at this moment, was standing outside
the Oval Office holding a final version of the statement announcing the breakdown in talks and blaming Boehner.

At 8:15 p.m. the president phoned the speaker.

“John,” the president said, “if this can help you get there, I’m okay with it. But I can’t do anything else. It’s got to be security/nonsecurity . . .”

The White House team in the Oval Office was listening to the president’s end, and it seemed like Boehner had interrupted the president. What now? Hearts sank. Not again. Why had Boehner interrupted?

“Do we have a deal?” Obama asked.

Boehner said they did. “Congratulations,” he said.

“Congratulations to you too, John.”

Then Obama turned to the staffers in the room. “Let’s not do this again,” he said. “We’re not going to negotiate on the debt limit ever again.”

• • •

That night the 74-page “Budget Control Act of 2011” was posted on congressional websites. Though it had odd procedural twists, it effectively guaranteed that Obama would get $2.4 trillion added to the debt ceiling. Nearly $1.2 trillion would be cut over 10 years, beginning in 2013, and a new 12-person committee from the Senate and House—the supercommittee—would have until November 23, 2011, to find at least another $1.2 trillion in deficit reduction. If the supercommittee failed, the trigger would go off, sequestering another $1.2 trillion in cuts over 10 years.

Monday on the House floor, Minority Leader Pelosi rose to say she would vote for the bill.
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“I urge you to consider voting yes, but I completely respect the hesitation that members have about this.” She added, “I hear that our Republican colleagues have said they got 98 percent of what they want in the bill. I hope that their votes will reflect that.”

The House passed the Rubik’s cube by a vote of 269 in favor, with 174 Republicans joined by 95 Democrats.
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The Senate followed the next
day with a vote of 74–26 that included majorities from both parties, and the president signed it.
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House Budget Committee Chairman Paul Ryan blasted the deal in
The Wall Street Journal
for its failure to address the “scary, yet simple” math showing that Medicare, Medicaid and Obamacare spending were out of control.
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Less expected was former Obama economics czar Larry Summers’s attempt to blow a hole in the deal with a
Washington Post
op-ed in which he made the same arguments he had in the White House: “Despite claims of spending reductions, the agreements reached so far are likely to have little impact on actual spending over the next decade.”
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This was, he noted, because “the current Congress cannot effectively constrain” a future Congress, which would do what it wanted.

Summers also noted the failure in the legislation to address whether the Bush tax cuts, especially for the upper brackets, would be extended. As a practical matter, not extending the tax cuts for the wealthy would add nearly $1 trillion to the U.S. Treasury over 10 years, making it easy for the supercommittee to reach $1.2 trillion in deficit reduction.

“But this is an unlikely outcome given the likely composition of the 12-member supercommittee,” he wrote.

• • •

Lew knew the deal didn’t get the whole job done, yet by avoiding default they had done important work. The American economy had been pulled back from disaster. So, there had to be some sense of satisfaction. In his view, it had always been inconceivable that the Republicans would push the economy over the cliff. “After 30 years of this,” he told a White House colleague, “high-wire acts get resolved by landing.”

The president told me, “In the final three weeks, it was as intense a period as I’ve had in my presidency.”

Z
ero. David Plouffe couldn’t believe it. The monthly jobs report came out the morning of Friday, September 2, 2011, and there it was, on the very first line: a zero.
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No jobs had been added to the U.S. economy in the month of August.

Zero, Plouffe repeated to himself. Not 100. Not negative. In a way, negative would have been better. Zero. You couldn’t make this up.

Unemployment was stuck at 9.1 percent, meaning 14 million of the 153.6 million Americans in the workforce were unable to find a job. Digging into the numbers only made it worse. The number of people classified as “involuntary part-time workers,” meaning they wanted full-time employment but could not find it, was another 8.8 million. Nearly one million people had given up looking for work, meaning they weren’t even counted among the 9.1 percent unemployed. In all, 15.4 percent of the workforce was unemployed, underemployed or had given up.

To Plouffe, with his eyes on the 2012 elections, this was terrible news. No president since 1940 had been reelected with unemployment above 7.2 percent.

Plouffe had watched Obama struggle through a brutal August. The debt limit fiasco had driven public opinion of both the president and
Congress to new lows. Inside the Democratic Party, the White House was being blasted for failing to take the lead on the economy.

Within the White House, the senior staff was anxious to begin rebuilding the president’s reputation as a strong leader.

• • •

On September 8, Obama appeared before a joint session of Congress to push the American Jobs Act, a $447 billion package made up of tax cuts and stimulus spending meant to spur job creation.
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The speech was delivered in prime time to a national television audience.

The centerpiece of the plan was another year-long extension of the very popular payroll tax cut. Obama was back in the role of tax-cutter-in-chief.

“It will provide a jolt to an economy that has stalled and give companies confidence that if they invest and hire, there will be customers for their products and services,” Obama said. “You should pass this jobs plan right away.”

Pass this bill. He repeated the demand 17 times in the 32-minute speech.

• • •

Eric Cantor was not surprised that the payroll tax cut was back. He had predicted it in 2010. Republicans couldn’t oppose it. Raising taxes on working people would be against their economic philosophy, and would get them shredded politically.

“Let’s just rip the Band-Aid off,” Cantor said in a meeting with Boehner, McConnell and Kyl. Let’s just agree with the president and take the issue off the table.

Cantor also had a personal reason for wanting to avoid this fight. He was in the midst of an image improvement project. He had taken a beating during the debt limit battles. He had been seen as inflexible and demanding. His staff was urging him to show at least some visible willingness to work with the administration.

But McConnell had other ideas. He was convinced that the payroll tax cut gave Republicans leverage to get big things.

• • •

The American Jobs Act speech marked the start of an intense media campaign by the president and a shift in strategy. Instead of trying to work with Congress, he would attack. He would take the issues to the American people. He had looked weak, always going back to Boehner, seeking deals. Now it was going to be a new war. In speech after speech, he pushed for Congress to take up the bill, hammering particularly on the issue of the payroll tax cuts.

On September 12 in the White House Rose Garden, Obama surrounded himself with teachers, veterans, firefighters, police officers and others who would be helped by continuing the tax cut.
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Stressing the fact that the payroll tax cut would reduce the taxes paid by small business owners, he ridiculed Republican resistance to his jobs plan.

“Instead of just talking about America’s job creators, let’s actually do something for America’s job creators,” he said.

Inside the White House, Plouffe was reasonably sure the Republicans wouldn’t prolong the fight over the payroll tax cut. The president was scoring points all over the media by slamming Republicans, noting that their unwillingness to extend the payroll tax cut meant they would be raising taxes on all workers.

“They’ll be too smart to keep letting us do this,” Plouffe told senior White House staff. “They’ll agree to it quickly. Take the energy away.”

• • •

Meanwhile, the other budget issue was still pending. Boehner and Reid continued to voice utter confidence that the new congressional supercommittee would be able to find the additional $1.2 trillion in deficit reduction over 10 years required by the Budget Control Act that passed in August.

In an interview, Boehner said, “The supercommittee is going to work.
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I’ve got Reid’s and McConnell’s commitments the supercommittee is going to work.”

It was a sure thing. All Reid and Boehner had to do is appoint the
12-member, bipartisan supercommittee and make sure the committee found the cuts before the November 23 deadline.

If it reached agreement, the supercommittee’s plan would be guaranteed a filibuster-free up or down vote without amendments. If there was no agreement, Congress would face a mandatory trigger that would automatically cut or sequester that amount of money.

Boehner told the House Republican leadership and other key members not to worry about the sequester, which would take half the spending cuts from Defense and the other half from domestic programs.

“Guys, this would be devastating to Defense,” he said. “This would be devastating, from their perspective, on their domestic priorities. This is never going to happen.”

• • •

Reid, who had conceived of and pushed for the supercommittee, named Patty Murray, a Washington State Democrat who had been in the Senate 18 years, as the co-chair. She was a Reid loyalist and the fourth-highest-ranking Democrat in the Senate.

For the Republican co-chair, Boehner chose Jeb Hensarling, the 54-year-old Texan who described himself as a movement conservative. The fourth-highest-ranking member of the House Republican leadership, Hensarling was much closer to Cantor than Boehner. He was joined at the hip with Paul Ryan on economic philosophy, and he believed that dramatic structural reform of the entitlement programs was the central governing problem of the day. If Hensarling could get an agreement with the Democrats, it would get the approval of the House Republicans.

Murray reached out to all members of the committee,
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including
Jon Kyl, the hard-line Republican whip and one of the group’s three Senate Republicans. She phoned him at his home in Arizona.

Oh, Kyl’s wife, Caryll, said, Jon is out working in the yard with some rented equipment, so he can’t come to the phone. Ever the fiscal conservative, Jon would call back when the machine had been returned and the meter was no longer running. Kyl called Murray the next day. “You know I was renting it by the hour,” he explained.

• • •

Meetings began in September and by the end of October various proposals and offers were flying around. The vast divide over the size of a deficit reduction deal and its particulars, apparent during the summer in the Obama-Boehner negotiations, still existed.

• • •

“I have gone way out on a limb,” Reid said in a meeting with Boehner.
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“We have all made pledges and commitments.” Then he offered the standard cliché about such bipartisan deals: “The only way this will work is if we all jump off the bridge together.” In order to agree to changes in the cost-of-living adjustments for Social Security and age eligibility in Medicare, he said he had to stick with a proposal made by the Democrats on the supercommittee for a substantial increase in tax revenue. “If you can’t agree to it, then no hard feelings. This is hard for both of us.”

Soon Reid concluded that the Republican tax phobia was going to prevent any supercommittee agreement. The reason, he said, was not Boehner. “These Tea Party nuts are never going to let him get there.”

• • •

By November, the supercommittee had made little progress. So Boehner made an end run around Hensarling. He reached out in private to another supercommittee member, Representative Dave Camp, the chairman of the House Ways and Means Committee. Boehner and Camp, two Republican Midwesterners who shared a moderate streak,
had both come to Congress in 1991, were on their 11th terms, and had developed a close working relationship and even a friendship.

Boehner told Camp to make a secret offer of $600 billion in revenue over 10 years as part of a broad tax reform package. It had to stay secret. The leaks of his $800 billion revenue offer to Obama had been part of the summer debt ceiling disaster.

That $600 billion seemed right, Camp said. It was half the $1.2 trillion deficit reduction goal and should be achievable.

At noon on Sunday, November 13, Camp made the $600 billion offer to Senator Max Baucus. A member of the supercommittee, Baucus was also chairman of the Senate Finance Committee, making him Camp’s tax counterpart.