WASHINGTON -- Social Security and Medicare may have been saved by the Tea Party's refusal to accept President Barack Obama's "grand bargain."
On Friday evening, Speaker John Boehner (R-Ohio) walked away from the latest offer on the table by Obama, who summoned congressional leaders back to the White House on Saturday for an 11:00 meeting to hash out a Plan B. The most viable option left for addressing the debt crisis, crafted by a bipartisan pair of Senate leaders, calls for much smaller cuts than the ones the president was willing to make.
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President Obama and Treasury Secretary Tim Geithner will be joined by Senate Majority Leader Harry Reid (D-Nev.), Minority Leader Mitch McConnell (R-Ky.) and the House leaders, Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.). Noticeably absent are the congressional deputies, particularly Majority Leader Eric Cantor (R-Va.) whose testy exchanges with the president have added an extra layer of difficulty to the talks.
With the Tea Party's major proposal knocked down by the Senate, and with the Obama-Boehner talks scuttled, negotiations are now focusing on finding a solution that can garner just enough votes in both chambers to become law in under ten days. It's all about whipping votes now.
"No one wants to punt until default is the only other option," a Democratic aide said Friday morning, before the Senate voted down a House offer that coupled a debt ceiling raise with a radical constitutional amendment.
With the "Cut, Cap and Balance" bill out of the way, the lone obstacle to the debate's conclusion was the talks between Boehner and Obama. The collapse in those grand bargain negotiations paradoxically move the broader debt ceiling negotiations closer to an end. And not a moment too soon: The White House has repeatedly said that July 22nd was the day by which Congress must have identified a path forward and begun work toward its passage.
During a hastily called press briefing on Friday night, Obama said Boehner called him half an hour earlier and "indicated he was going to be walking away" from the compromise the two of them had been privately working on. A Democratic source told The Huffington Post that the president had called Boehner on Thursday evening to discuss the deal, but never heard back. The president tried again Friday afternoon. He finally got a return call at 5:30 p.m. The speaker, the source added, briefed the press about his decision to pull out of the deal before telling Obama.
"I've been left at the alter now a couple of times," said Obama.
Speaking to a half-filled room of reporters, the president laid out just how dramatic the cuts to the social safety would have been in the deal he was trying to give Republicans. He said that he couldn't believe Boehner walked away from the proposal he was offering: $3.5 trillion in spending cuts over 10 years, smaller tax increases than those laid out in a bipartisan Senate plan and cuts to entitlement programs, something Democrats have pushed hard against. It also didn't include revenues that Obama has insisted be in a final package, namely via closing tax loopholes and ending subsidies for the oil and gas industry.
"In other words, this was an extraordinarily fair deal," Obama told reporters. "If it was unbalanced, it was unbalanced in the direction of not enough revenue."
The president appeared genuinely flummoxed at the talks falling apart, saying there "doesn't seem to be a capacity for [Republicans] to say yes." He said he couldn't believe Congress would "end up being that irresponsible" as to impose a "self-inflicted wound on the economy at a time when things are so difficult."
The New York Times also played a major part in the breakdown of talks between Boehner and the White House, reporting Thursday that the pair had moved very close to a deal. Both sides spent the rest of the day knocking down the report, while Senate Democrats fumed that the White House was caving.
The latest breakdown comes with about a week left until the Aug. 2 deadline, at which point the government is expected to run out of money to pay its bills. Even if a default is averted, the protracted debate over raising the debt limit has left the U.S. government dangerously close to having its credit rating downgraded. In that event, Americans could expect a spike in interest rates on their credit cards, student loans and mortgages, with ramifications felt through the U.S. and global economy.
"We have now run out of time," the president said. He said he told congressional leaders to come back to the White House at 11 a.m. on Saturday "to explain to me how we are going to avoid default."
In a press conference later Friday night, Boehner accused the White House of having “moved the goal post” in negotiations.
“The president demanded $400 billion more” in revenues when the two of them met Thursday, Boehner said, which is “nothing more than a tax increase on the American people.”
He said he and House Majority Leader Eric Cantor (R-Va.) were “very disappointed” by that demand. Boehner also sent a letter to House Republicans on Friday night explaining why he pulled out.
"It has become evident that the White House is not serious about ending the spending binge that is destroying jobs and endangering our children's future," the GOP leader wrote. "A deal was never reached, and was never really close."
At a briefing with reporters shortly after the president spoke, three senior White House officials laid out in detail their version of where the discussions fell apart.
On the discretionary spending front, both sides had "identical offers," said one of the officials. There would be $1.2 trillion in cuts over the course of ten years; $1 trillion in savings that would come from the draw-down of the wars in Afghanistan and Iraq; and $250 billion in savings in Medicare over the course of 10 years. Both sides had also agreed to attach a second piece of legislation, to be decided via the reconciliation budget process, that would have changed the retirement age for Medicare and changed the premium structure for Medicare Part B and D, while eliminating certain kinds of supplemental insurance. That bill would also contain changes to the way Social Security benefits were paid starting in 2015, with buffers put in to protect the lowest-income beneficiaries.
There was, in addition, an informal agreement to try and extend Social Security's solvency by an additional 75 years. How they would get there, however, remained a point of contention, with the president wanting a package of benefit and premium changes and Republicans focusing just on the benefit side. Unable to overcome that impasse, the two sides settled on vague language requiring them to meet that 75-year goal with future reforms.
Where the two sides remained apart were on Medicaid cuts, with Republicans demanding tens of billions of dollars more in cuts than the president was comfortable making. White House officials described that difference as possible to overcome, however.
The revenue component, in the end, remained unbridgeable. According to senior White House officials, each side had agreed to pass tax reform down the road that would result in $800 billion in revenue generated -- the equivalent amount of savings that would be achieved if the top-end Bush tax cuts were simply allowed to expire. The administration wanted $400 billion in revenues on top of that. Republicans wanted zero, and in statements on Friday night GOP leadership aides insisted that the White House had changed the contours of the negotiations by making that demand in recent days.
Obama offered to move off that $400 billion mark should GOP leadership lessen the type of cuts to entitlement programs they were demanding, White House aides said.
In addition, the two sides could not figure out what to do if that aspirational tax reform package wasn't achieved. The White House, at various points, proposed that the fallback option be the actual expiration of the Bush tax cuts for the wealthy. Republicans demanded that they have something as bluntly frightening to Democrats. On Thursday, GOP leadership proposed that the penalty for inaction on tax reform be the repeal of the health care law's individual mandate as well as the newly created Independent Advisory Board, which has been set up to find cost savings in Medicare. The White House balked at the offer.
"Our view was we are not going to put the individual mandate in a deficit reduction package," said a senior White House official. "But we were open to other ideas and there are any number of formulations for us."
All of which does not mean that the big deal is now dead. In fact, White House officials made it abundantly clear that they would welcome GOP leadership back into those discussions.
"The speaker withdrew from the talks. This offer is still available,” said one of those officials.
Boehner, at his briefing, said he didn’t think his relationship with Obama, or debt talks, are beyond repair. He said he planned to go to the White House on Saturday with other leaders.
At this stage, the most viable proposal left on the table appears to be a far less ambitious debt plan put together by Reid and McConnell. Their proposal, dubbed a "fallback option," calls for $1.5 trillion in cuts, generates no new revenues and would put the onus fully on Obama to raise the debt limit, without Congress. It would also require the president to raise the debt ceiling in three increments over the next year and a half -- a politically driven requirement by McConnell aimed at making Obama take responsibility for all debt ceiling hikes ahead of the 2012 elections.
The other potential remedy -- for the president to exercise the so-called constitutional option and invoke 14th Amendment powers to raise the debt ceiling himself -- was ruled out, once again, during the White House briefing.
"There are no options other than a legislative solution,” said a senior White House official.
A Democratic staffer familiar with Hill negotiations concurred that the Reid-McConnell plan appears the most likely resolution. The fight now heads to the trenches: The leaderships of both parties will cobble together coalitions in the House and Senate that can move the package through. In both parties, the wings will generally oppose leadership and the center will hold, if history is any guide. The same coalition passed the Wall Street bailout and the Obama-GOP tax cuts.
"We are prepared to compromise consistent with our values," House Minority Leader Nancy Pelosi (D-Calif.) said in response to the news. "Speaker Boehner's ‘adult moment’ is long overdue. Our economy, our children's education, our seniors' security and our nation's fiscal soundness require that we act without further delay."
Of course, there's also the bipartisan Senate Gang of Six proposal, which would slash $3.7 trillion in deficits over 10 years and raise up to $1 trillion in new revenues through tax code reform. But that proposal has critics in both parties, and some say there isn't enough time to turn it into a bill, send it to various committees for debate and pass it by Aug. 2.
Frustrations are clearly high on both sides of the aisle. As Twitter blew up at the news of the Obama-Boehner talks crumbling, Cantor spokesman Brad Dayspring chimed in with a tweet knocking Obama for making it seem as if Republicans thwarted the process.
“As if there's really a question whether President Obama threw a tantrum at the White House last week - same guy just appeared,” Dayspring tweeted.
Rep. Peter Welch (D-Vt.) said Congress had to move fast now that things have gotten hairy. He warned that the situation is nothing like the government shutdown narrowly averted earlier this year.
"If you've got the speaker walking away from the White House -- astonishing in and of itself -- the next step is meltdown in the markets," Welch said. "This is tempting the markets to turn, and when they do, it will be sudden and savage, then things will be out of control and the damage will be huge and irreversible."
08/02/2011 5:13 PM EDT
Pelosi: Democrats 'Saved The Day' On Debt, Now Time For Jobs
House Minority Leader Nancy Pelosi (D-Calif.) praised Democratic lawmakers for bringing the country "back from the brink of default" and said now is the time to shift attention to jobs.
"We just completed a very lively leadership meeting of the House Democrats, where we talked about ... the necessity of Democrats to save the day yesterday, pulling our country back from the brink of default," Pelosi said during a Tuesday press conference.
"It was a bitter pill for us to swallow, but we did," Pelosi said of the final debt deal. "And as we did, we saved Medicare, Medicaid and Social Security."
With that bridge crossed, the next step is refocusing Congress on job creation, she said.
"Jobs, jobs, job, jobs, jobs. You cannot say it enough," Pelosi said. "I really liked what Willie Nelson said, or at least he was quoted as saying -- the American people are more concerned about a ceiling over their head than raising the debt ceiling. We know we need to do both."
The Minority Leader ducked questions about when she would announce her picks for the newly created "Super Congress," a 12-member panel of lawmakers who will decide where to make up to $1.5 trillion in spending cuts. Pelosi also wouldn't say if she will require her picks to insist on new revenues in addition to cuts. The goal, she said, is to strike a balance in cuts and spending while preserving entitlement benefits.
"Whoever is at that table will be someone who will fight to protect those benefits," she said.
-- Jennifer Bendery
08/02/2011 3:42 PM EDT
AARP Alarmed By Secretive Super Congress
AARP is relieved that the debt deal did not hack into Medicare, Medicaid or Social Security, but the lobby for older Americans is worried all those programs could get whacked by a secretive super committee that's supposed to find an extra $1.5 trillion in deficit cutting.
The super committee -- made up of 12 lawmakers who will bypass the normal legislative process and produce a bill that cannot be amended -- will have to work quickly, coming up with a massive cutting plan by Thanksgiving.
"We are concerned that a fast-track committee process will deny Americans a voice in the discussion about critical tax, health and retirement issues," said AARP President Barry Rand in a statement.
“AARP believes that the American public deserves a seat at the table in any forum, including the newly created super committee, that discusses potential changes to these critical programs," Rand added. "We believe that our nation’s leaders should work together to strengthen health and retirement security for current and future generations.”
-- Michael McAuliff
08/02/2011 3:01 PM EDT
Top House Democrat Laments That Congress Can't Do Its Job
Rep. Rosa DeLauro (D-Conn.), one of the only Democratic leaders to vote against the debt bill, lamented on Tuesday that the new law includes the creation of an all-powerful "Super Congress" of 12 hand-picked lawmakers who can decide where to make up to $1.5 trillion in future spending cuts.
"I think you've asked a very important question," DeLauro said, when asked why lawmakers created a special committee to do what should be Congress' job. "My preference obviously would be to have Congress take on these responsibilities. But clearly there's a view that there's an impasse and therefore, hopefully, a commission can do that."
DeLauro, a co-chair of the Democratic Steering and Policy Committee, split from other Democratic leaders in voting against the debt bill, which increases the government's spending power by $2.4 trillion through 2013 while imposing as much as $1.5 trillion in cuts, mostly from non-defense spending. House Minority Leader Nancy Pelosi (D-Calif.), House Minority Whip Steny Hoyer (D-Md.) and Assistant Minority Leader James Clyburn (D-S.C.) all voted for the bill.
"For me, voting against the bill yesterday was about, given what is in this piece of legislation, it makes these opportunities for economic investments and economic growth all the more difficult," DeLauro said. "If we choke off all of our opportunities for investment, we will take this nation backwards instead of forward."
-- Jennifer Bendery
08/02/2011 2:04 PM EDT
Obama Signs Debt Deal
|@ CNNPolitics : WH says President Obama has now signed the debt ceiling bill into law|
08/02/2011 1:47 PM EDT
AARP 'Relieved,' 'Pleased' With Debt Deal
Senior citizens lobbying force AARP is happy that Social Security checks will not be interrupted by a debt ceiling standoff and that future benefits won't get automatically clobbered if the 12-member so-called super Congress fails to reach an agreement on deficit reduction.
"We are relieved that Congress has acted on a bipartisan agreement to address the debt ceiling and prevent default to ensure that seniors will continue to receive their Social Security checks and have access to health care," AARP CEO A. Barry Rand said in a statement. "Going forward, we are pleased that Social Security, Medicaid and Medicare benefits are protected if the so-called 'super committee' fails to reach an agreement later this fall, but we will remain vigilant in our efforts to protect the health and retirement security of seniors and future retirees. We are concerned that a fast-track committee process will deny Americans a voice in the discussion about critical tax, health and retirement issues. We also are concerned about the potential use of a trigger that would arbitrarily cut provider payments under Medicare, which could unfairly shift costs to seniors."
-- Arthur Delaney
08/02/2011 1:44 PM EDT
Obama: Let The Pivot To Jobs Begin
Speaking just minutes after the Senate passed legislation to raise the debt ceiling -- removing the last political hurdle for that bill's passage – President Obama delivered a speech in the Rose Garden in which he once again pleaded for a renewed focus on jobs.
Sounding at times exasperated that the political conversation had veered so swiftly to the topic of austerity, Obama urged Congress to present him with job-creating bills as soon as it returned from its August recess. The specifics were pretty much the same as the White House has pushed for weeks if not months: free trade agreements, patent reform, an infrastructure bank, regulatory changes and the extension of the payroll tax cut and unemployment benefits.
"Growing the economy isn’t just about cutting spending, it is not about rolling back regulations that protect our air and water and keep people safe. That is not how we are going to get past this recession. We are going to have to do more than that," he said.
"There already is a quiet crisis going on in the lives of a lot of families and a lot communities all across the country. They are looking for work and they have been for a while ... that ought to compel Washington to cooperate, that ought to compel Washington to compromise and that ought to compel Washington to act."
Coming so soon after both the president and a large portion of the Democratic party signed off on a bill that takes roughly $2.4 trillion out of the economy in the next 10 years, it was hard to imagine that the remedies being offered would have much of a cumulative effect. Moreover, a "pivot" to jobs was already tried unsuccessfully after the tax cut debate at the end of 2010 and the government shut down debate in the spring of 2011.
But Obama's speech was more about establishing the proper tone than it was about forging out new legislative remedies. With the debt ceiling debate now over until after the 2012 election, the major discussion shifts back to what, if anything, government can do to spur economic growth. One portion of that argument will come when Congress must pass a budget to fund the government by the end of September. But the White House will likely try and create some sort of defining contrast between the president and his Republican critics well before then.
-- Sam Stein
08/02/2011 1:42 PM EDT
Bill Heads To Obama's Desk
HuffPost's Michael McAuliff and Elise Foley report on the Senate vote:
The Senate did its part Tuesday to end a months-long standoff and raise the debt ceiling, passing a bill that dramatically cuts spending and creates a new "super committee" that will slash budgets even more.
The Senate approved the measure 74 to 26. The bill will go to President Obama's desk with little time to spare; Treasury Secretary Timothy Geithner has said that the country would begin to default on its obligations at midnight if a bill was not passed by then.
Although Democrats had many complaints about the bill, they supported it overwhelmingly, with 45 voting "yes" and six voting "no." Twenty-eight Republicans voted in favor of the bill, meanwhile, while 19 voted against it. The Senate's two Independents, Sens. Joe Lieberman (Conn.) and Bernie Sanders (Vt.) voted "yes" and "no," respectively.
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08/02/2011 1:02 PM EDT
Harry Reid Speaks After Debt Deal Vote
"Neither side got what they wanted. ... That's the way our system works. That's what compromise is all about."
08/02/2011 12:31 PM EDT
Senate Passes Debt Ceiling Deal
The final vote is 74-26, more than the 60-vote majority required for passage.
08/02/2011 12:00 PM EDT
Debt Deal Polls: Leaders Behaving 'Like Spoiled Children'
HuffPost's Mark Blumenthal reports:
An overnight poll conducted by CNN and ORC International finds more Americans disapprove (52 percent) than approve (44 percent) of what the pollsters described as "an agreement between Barack Obama and the Republicans and Democrats in Congress [that] would raise the federal government's debt ceiling through the year 2013 and make major cuts in government spending over the next few years."
The poll delved deeper into specific aspects of the agreement and found support for spending cuts but opposition to the lack of tax increases for wealthy Americans. Specifically,
- 65 percent approve of $1 trillion in cuts in government spending over the next 10 years (30 percent opposed)
- 60 percent disapprove of the fact that the agreement does not include any tax increases for businesses or higher-income Americans
The survey also included an unusual question that dramatizes the way Americans feel about the overall debate. More than three out of four respondents said elected officials in Washington that have dealt with the debt ceiling debate have behaved "mostly like spoiled children" (77 percent) rather than "responsible adults" (17 percent).
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