In the frenzied final days before the U.S. faces a government default, President Barack Obama and House Speaker John Boehner, R-Ohio., moved closer to striking a far-reaching deficit reduction deal Thursday. Though the parameters of the emerging debt package remained fluid, the two sides reportedly were discussing $3 trillion in deficit reduction, relying almost exclusively on cuts in spending and entitlement programs and with no immediate revenue increase.
Obama met with four top Democratic congressional leaders Thursday evening for 45 minutes, in part to try to calm complaints from Senate Majority Leader Harry Reid and others that the president was bending to Republican demands for spending cuts only. As of about 8:30 p.m., the president was not scheduled to meet with top Republican leaders tonight.
Boehner said House Republicans were willing to compromise on a budget deal to increase the government’s borrowing ability as long as the package did not include tax increases. “It would be irresponsible of Congress and the president not to be looking at backup strategies for how to solve this problem,” Boehner said at a morning press conference. Obama, for his part, wrote in an editorial in USA Today that the talks provided an opportunity to do “something big and meaningful” on a deal that includes new tax revenue as well as major budget cuts.
“Lines of Communication Open”
The Washington Post reported that Obama and Republicans were in negotiations to save $3 trillion over the next decade through sharp cuts in agency spending and politically painful changes to health and retirement programs, but without any immediate increase in taxes. Boehner’s office didn’t say as much. “While we are keeping the lines of communication open, there is no ‘deal’ and no progress to report,” said Boehner spokesman Michael Steel on Thursday.
Some Democrats said they’re worried Obama would agree to cuts to benefit programs without raising tax revenue. Congress has only 12 days to raise the $14.3 trillion debt ceiling, after which the Treasury Department says the government will run out of money to pay its bills and could default.
“Everything looks stuck until it’s unstuck,” Rep. Dan Lungren, R-Calif., told reporters near the House floor. “I’ve been here long enough to see us up at the brink so many times, and we find some way to avoid going over the side.” The House GOP conference will hold a special meeting early Friday.
Senate Budget Committee Chairman and “Gang of Six” member Kent Conrad, D-N.D., told MSNBC Thursday that he prefers a short-term six- month extension of the debt ceiling. The White House has adamantly opposed such a short-term deal. But in a shift, Obama said on Wednesday that he would back a short-term deal to prevent a disastrous financial default on Aug. 2 but only if a larger deficit-cutting agreement was essentially in place.
Meanwhile, the so-called “Gang of Six” proposal introduced yesterday, which would reduce the deficit by $3.7 trillion over 10 years, has been gaining momentum among senators of both sides, and Obama quickly praised it. As the August 2 deadline approaches, it’s increasingly unlikely the plan in its entirety will pass due to the length of time it takes for the Congressional Budget Office to score it and draft the legislation. It also raises revenue by $1 trillion over the coming decade, a condition House Republicans have rejected.
But early Thursday morning, the godfather of the “no tax” pledge, Grover Norquist, opened the door for House Republicans to sign onto a debt deal that includes raising revenues. He told The Washington Post editorial board that allowing the Bush-era tax cuts to expire would not be a tax increase. Later, he clarified that position on MSNBC, saying he opposed tax changes but that there might be ways to remain consistent with the pledge.
Across the Capitol, the Senate began debate on the “cut, cap and balance” bill Thursday, which passed the House earlier in the week. It would raise the debt ceiling by $2.4 trillion and require amending the Constitution to include a balanced budget amendment. Obama threatened to veto the bill and Senate Democrats called it “dead on arrival.” Senate Majority Leader Harry Reid, D-NV., who called the bill the “worst legislation in the history of this country,” announced he would bring a vote on the bill to the Senate Friday morning.
Betting “A Porterhouse Steak”
Republican lawmakers argue it’s the only choice to stave off a default. Sen. Tom Coburn, R-OK., said, “This is the only viable plan right now that will do that. And I will bet you a porterhouse steak that if it lands on his [Obama’s] desk, he’ll sign that puppy.” Coburn, who rejoined the “Gang of Six” Wednesday, told The Fiscal Times he teamed up with the gang “because I thought we needed something to move the process along.” Coburn emphasized that the plan was never intended to be attached to a debt ceiling vote.
A new CNN poll found Republicans like the “cut, cap, and balance” approach to the debt ceiling, as do Democrats and independents. Most Americans support a balanced budget amendment, and most, but not as many, think an amendment is needed to control spending.
Officials from Standard & Poor’s, which last week put the government on a credit watch, briefed House Republicans Thursday on the consequences of a default in the event Congress doesn’t raise the ceiling. “I think people do understand the consequences,” David Beers, global head of sovereign ratings with S&P, told The Fiscal Times. “I don’t really have a clear sense about what deal might emerge. We are in a waiting mode.”
Freshman Rep. Bill Huizenga, R-Mi., was one of about 40 members briefed this afternoon. “It was meant to be a 1,000 foot-view, not descriptive of what we need to do,” Huizenga told The Fiscal Times of the meeting. “I’m not sure there is really anyone who sees the benefit of default. Any package must be credible and address the underlying spending issues we have.” Huizenga, who favors “cut, cap and balance,” said if the bill doesn’t pass the Senate on Friday, he’ll wait to see what comes of the emerging deficit plan before he commits himself to any one plan.