With time is running out for an agreement to raise the debt ceiling and avert a default on U.S. borrowing, President Obama on Monday offered a full-throated argument for a major $4 trillion long-term deficit-reduction plan certain to enrage both parties. It includes increases in taxes as well as reductions in Social Security and Medicare benefits.
“I continue to push congressional leaders for the largest possible deal,” Obama said at a morning news conference at the White House. “And there's going to be resistance. There is, frankly, resistance on my side to do anything on entitlements. There is strong resistance on the Republican side to do anything on revenues. But if each side takes a maximalist position . . . then we can't get anything done.”
House Speaker John Boehner, R-Ohio, over the weekend abruptly pulled back from his secret negotiations with Obama on a “grand bargain’ that would require both parties to compromise on “sacred cows” including taxes and entitlements, and there was no sign today that Republicans would agree to anything but a much scaled back, $2 trillion package devoid of any increased revenue. Obama began meeting with congressional negotiators at the White House around 2 p.m.
Contrary to the White House’s characterization of the private talks between the President and the Speaker over the past 10 days or so, Boehner insisted today that “There were no tax increases ever on the table – there never was any agreement to allow tax rates to go up in any discussion I’ve ever had with the White House, not once.” The Speaker, who has played golf with the president and enjoyed easy entre to the White House, appeared defensive at a Capitol Hill news conference where he sought to justify his abandonment of private talks under enormous pressure from other House GOP leaders and rank-and-file members.
But as Republican and Democratic leaders prepared to resume talks at the White House, Obama used a nationally televised press conference to make this case:
- There will never be a better time than now to hash out differences over the most politically sensitive issues, including reductions in spending for entitlement programs closely guarded by Democrats and tax increases that are overwhelmingly opposed by Republicans and independents. The President has argued that negotiating a smaller package can be just as difficult as crafting a larger agreement, and that both sides should use this opportunity to achieve as much as possible.
- If GOP leaders were to go along with changes in the tax code to raise revenues, none of the increases would take effect until 2013 at the earliest, after next year’s presidential and congressional elections. Those tax measures could include elimination of costly deductions for corporations and wealthy Americans, or allowing a portion or all of the Bush era income tax cuts to expire. One exception is a cut in the payroll tax that is due to expire at the end of the year unless Congress votes to extend it.
- Social Security hasn’t contributed to the deficit problem, and any changes made – such as raising the retirement age or reducing the cost of living formula – would be aimed at strengthening and perpetuating the retirement system, not reducing the debt.
- Defense cuts beyond those already planned as well as savings in Medicare, Medicaid, and other federal health-care programs would be on the bargaining table.
- Obama will veto any short-term measure designed to temporarily extend the Treasury’s borrowing authority by a month or two while Congress and the administration continues to try to work out their differences.
“That is not an acceptable approach,” Obama said of short-term extensions of the debt ceiling, an idea floated over the weekend by Senate Republican Minority Leader Mitch McConnell, R-Ky., “So we might as well do it now. Pull off the Band-Aid. Eat our peas. Now is the time to do it. If not now, when?”
Treasury Secretary Tim Geithner has warned that the government will exhaust its $14.3 trillion borrowing authority and begin defaulting on its obligations by August 2, prompting Obama to say that negotiators will meet every day until they work out a final long-term agreement. The president contends that the two sides actually have only 10 days left to cut a debt-ceiling deal because of the time it will take to draft and pass the enabling legislation.
The President and top congressional leaders resumed meeting today following a 90 minute Sunday evening session in which Obama said he told the lawmakers that “Now is the time to deal with these issues” and that “if not now, when?” He challenged Republicans to make good on their earlier demands for a large-scale, far-reaching deal to rein in the nation’s debt and deficits. And he blasted as “irresponsible” those politicians who reject any increase in the federal debt ceiling.
Today’s meeting was to focus on the details of a budget framework produced by a small, bipartisan group that was led by Vice President Joe Biden. The Biden talks made considerable headway in identifying potential spending cuts but abruptly ended in the middle of June after six weeks of negotiations when House Majority Leader Eric Cantor, R-Va., and Sen. Jon Kyl dropped out, citing tensions over tax issues that more properly should be handled by the President and Speaker. The seven-member Biden group targeted $2.1 to $2.3 trillion in potential savings, according to Cantor. Some $200 billion to $400 billion in savings in Medicare and Medicaid were tentatively agreed to; approximately $1.1 to $1.3 trillion of the savings were in discretionary spending – the annual expenditures for running the government and funding programs -- and $275 to $325 billion was found in other mandatory spending including farm subsidies, federal employee pension contributions.
Speaking to reporters one hour ahead of the White House meeting, Cantor reiterated his hard line stance that Republicans are united against raising taxes. He dismissed speculation that there was a rift between him and Boehner on the issue of revenues. “The Speaker and I are on the same page,” Cantor told reporters on Capitol Hill. “We don’t believe you should raise taxes on the American people especially in this economy. We said it in our pledge.” On several occasions Cantor referenced the Republican’s “Pledge to America” from last fall which promised not to raise taxes.
Even though the President said he would not raise taxes until 2013, Cantor rejected that idea. “We’re not asking the President to violate his promises to the people of this country,” he said. “We wish he wouldn’t ask us to do the same.” Cantor remained hopeful that Monday’s talks would yield areas of commonality.
"We certainly don't want to walk out," Cantor said, but "we're not going to raise taxes." Cantor added that there is “plenty of shared sacrifice” from his party and that they have already made compromises by agreeing to increase the debt limit per request of the President.
Unlike some members of his conference and several Republican presidential candidates, Cantor accepted Geithner’s warning that if Congress did not raise the statutory debt limit by August 2, the financial markets would result in turmoil. U.S. stocks plummeted today, sending the Standard & Poor’s 500 Index toward the biggest two-day drop since March, as concern grew that the White House and lawmakers would fail to agree on a deficit package and that Europe’s debt crisis will spread.
Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee who participated on the Biden panel,., insisted in an interview with The Fiscal Times that only $1.1 trillion in deficit reduction was identified and those savings were contingent on Republicans agreeing to some new taxes. “The numbers the Republicans put out are grossly exaggerated and grossly inflated,” Van Hollen said.
Obama warned that failing to raise the debt limit would lead to damaging consequences for the U.S. economy, including higher interest rates for ordinary Americans. “I promise you, they won’t like that,” he said.
Asked whether he was unwilling to take some political heat from his troops in order to develop a debt reduction plan with real teeth, Boehner replied: “Listen, I understand that this is going to take sacrifice and it’s going to take political capital on both sides. And I’m certainly willing to take my fair share of it. But if we’re going to take political capital, then let’s step up and do the big thing and the right thing for the country.
“But it takes two to tango, and they’re [the Democrats] not there yet,” he said.
More on the debt limit debate from The Fiscal Times:
World Series of Deficit Reduction: Game One—Tied
Debt Talks Unintended Consequences: Job Losses
GOP Mystery Candidate Is Fierce Debt Ceiling Hawk