| Boehner Walks Out On Obama; "Grand Bargain" Collapses; Pared Down Approach Coming; Republicans Blew Opportunity for Game-Changing Legislation Posted: 22 Jul 2011 05:10 PM PDT So much for the Bloomberg assertion earlier today that Obama Aligns with Boehner seeking a debt deal. Late this afternoon Boehner walked out on talks with the president, refusing to accept a plan Obama called a "Grand Bargain". The Speaker's server is flooded with requests for the Text of Boehner's Letter but here is a copy courtesy of the Washington Post. Dear Colleague,
Our economy is not creating enough jobs, and the policies coming out of Washington are a big reason why. Because of Washington, we have a tax code that is stifling job creation. Because of Washington, we have a debt crisis that is sowing uncertainty and sapping the confidence of small businesses. Because of Washington, our children are financing a government spending binge that is jeopardizing their future.
Since the moment I became Speaker, I've urged President Obama to lock arms with me and seize this moment to do something significant to address these challenges. I've urged him to partner with congressional Republicans to do something dramatic to change the fiscal trajectory of our country . . . something that will boost confidence in our economy, renew a measure of faith in our institutions of government, and help small businesses get back to creating jobs.
The House this week passed such a plan . . . the Cut, Cap & Balance Act, which passed the House with bipartisan support.
Along with Majority Leader Cantor, I have also engaged the president in a dialogue in recent days. The purpose of this dialogue was to see if we could identify a path forward that would implement the principles of Cut, Cap, & Balance in a manner that could secure bipartisan support and be signed into law.
During these discussions — as in my earlier discussions — it became evident that the White House is simply not serious about ending the spending binge that is destroying jobs and endangering our children's future.
A deal was never reached, and was never really close.
In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country.
The president is emphatic that taxes have to be raised. As a former small businessman, I know tax increases destroy jobs.
The president is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won't be there for their generation unless significant action is taken now.
For these reasons, I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward.
The Democratic leaders of the House and Senate have not been participants in the conversations I and Leader Cantor have had with the White House; nor have the Republican leaders of the Senate. But I believe there is a shared commitment on both sides of the aisle to producing legislation that will serve the best interests of our country in the days ahead — legislation that reflects the will of the American people, consistent with the principles of the Cut, Cap, & Balance Act that passed the House with bipartisan support this week.
I wanted to alert you to these developments as soon as possible. Further information will be coming as soon as it is available. It is an honor to serve with you. Together, we will do everything in our power to end the spending binge in Washington and help our economy get back to creating jobs.
Sincerely
John Boehner Obama: 'I was willing to take a lot of heat'Inquiring minds are watching President Obama's response to Boehner: 'I was willing to take a lot of heat' Each Side Blames the OtherThe Washington Post reports Obama-Boehner talks collapse; each side blames the otherDebt-reduction negotiations between President Obama and House Speaker John A. Boehner collapsed Friday, derailing an effort to reach a landmark agreement to cut spending, overhaul the tax code and avert a government default.
In subsequent statements, both sides blamed the other for an impasse that threatens to plunge the nation into a fiscal crisis if the government fails to meet a looming deadline to raise the federal debt ceiling.
"It's hard to understand why Speaker Boehner would walk away from this kind of deal," Obama said, but Boehner (R-Ohio) countered that it was the president who walked away from an agreement on revenue increases, demanding "more money at the last minute — and the only way to get that extra money was to raise taxes."
Saying that "we have now run out of time," Obama summoned Boehner, House Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) to the White House at 11 a.m. Saturday.
Obama told reporters at the White House Friday evening that he had offered Boehner more than $1 trillion in cuts to discretionary spending — both domestic and defense — and $650 billion in cuts to entitlement programs such as Medicare, Medicaid and Social Security. He said he had sought revenues that were less than those put forward in a bipartisan plan by the Senate's "Gang of Six." He said the $1.2 trillion in revenues could be accomplished without raising tax rates but by eliminating loopholes, tax breaks and deductions.
Now that he has "been left at the altar a couple of times," Obama said, the question for the Republicans is, "Can they say yes to the anything?"
The Obama-Boehner plan was far more sweeping than the backup plan that Reid and Senate Minority Leader McConnell had been drafting, and its potential sweep frayed nerves among both liberals and conservatives. Pared Down Approach Coming UpThe Wall Street Journal discusses a pared down approach in Grand Bargain Talks Collapse The deal's demise, the latest twist in Washington's month-long search for an agreement to raise the debt ceiling, left House Republican leaders looking for a pared-down approach that would prevent the U.S. government defaulting on its obligations Aug. 2. Mr. Boehner said he would start negotiations with the Senate, which would continue through the weekend, with the goal of forging a new framework by Monday.
Exactly what a smaller deal might look like is unclear. A number of options have been discussed that would cut the deficit between $1 trillion and $2.5 trillion. Changes to big government programs and the tax code won't likely be tackled.
Liberal groups on Friday made phone calls to Mr. Obama's re-election campaign and Democratic congressional offices attacking reports of an Obama-Boehner grand bargain. Justin Ruben, executive director of MoveOn.org, said it would "betray the core Democratic commitment to the middle class."
Senior Republican aides said disagreements over taxes and changes to entitlement programs became too large to overcome.
One big hurdle that emerged Friday was the mechanism that would ensure Congress made good on its promise, something it hasn't reliably done in the past. Democrats want Bush-era tax cuts for the wealthy to expire if Congress doesn't act; Republicans want the so-called trigger to be elimination of the individual mandate in Mr. Obama's health-care law, people familiar with the matter said. Rating Agency ResponseThe correct response from the rating agencies would be to downgrade US debt, not one notch but a handful of notches. Don't hold your breath on that. They will do one at most.
Republicans Blew Opportunity for Game-Changing LegislationThis was a dismal outcome, but hardly unexpected. Both sides are partially to blame but in my estimation Republicans blew it big time. They could have asked for anything in return for tax hikes. Here are three rock solid ideas. - Scrap Davis-Bacon and all prevailing wage laws
- End collective bargaining of public unions
- Pass national right-to-work legislation
Sadly, none of those sorely-needed ideas even came up in the discussions. I do not know if Obama or the Democrats would have gone along with those, but after all the Obama talk " I was willing to take a lot of heat", Republicans blew a golden opportunity to pass some game-changing legislation in return for some pissy tax hikes. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Obama Aligns with Boehner Causing Democrats to Scream of "Volcanic Moment" Posted: 22 Jul 2011 09:13 AM PDT The deficit ceiling debate took an interesting turn as Obama is considering going forward with House Speaker Boehner on a $3 trillion deficit reduction deal that does not include immediate tax hikes. Democrats responded angrily, threatening a "volcanic moment". Please consider Obama Aligns With Boehner in Seeking U.S. Debt Pact Amid Internal StrifePresident Barack Obama and House Speaker John Boehner, each facing strife within his own ranks and dwindling time to avert a U.S. default, pressed for a broad agreement to boost the debt limit while cutting spending by trillions of dollars and overhauling the tax code.
Obama summoned top Democrats to the White House last night after Democrats balked at word of a potential deal between the president and Boehner that would reduce the long-term deficit by about $3 trillion over 10 years through deep spending cuts without an immediate increase in taxes. Democratic lawmakers said they feared the president was moving toward an agreement that undermined their party's priorities.
"We are very volcanic at this moment," Senator Barbara Mikulski, a Maryland Democrat, said as she left a session at the Capitol with White House budget director Jack Lew. "The clock is running, the Republicans are running from a real solution. I don't want the president to be an enabler of that."
Boehner met today with rank-and-file House Republicans to brief them on the talks. Representative Steve LaTourette, an Ohio Republican, said Boehner was "the most sort of melancholy I've seen him." The speaker said yesterday he had prepared his members for a possible compromise with Democrats to raise the debt limit, and that he believed most of the 240 Republicans are prepared accept it.
Two congressional officials said the White House told party leaders it was pursuing a deal to cut spending, including on Social Security and Medicare, and a tax overhaul that could raise $1 trillion. That provoked an angry reaction yesterday from Senate Democrats, who said they feared they might be asked to swallow steep reductions in programs and trims to entitlement benefits with no assurance of higher tax revenue.
Obama wants those to include a tax increase on higher- income earners in 2013, while Republicans want to roll back portions of the health-care law Obama pushed through over their opposition in 2010, such as scrapping the mandate that every person have insurance or pay a penalty, according to a congressional official familiar with the talks.
Obama wants spending cuts to be gradual, with the fullest effects not felt until 2014 and beyond, to avoid shaking the economic recovery, the officials said, briefing reporters on condition of anonymity to discuss the closed-door talks.
Hopes were fading that a plan to shave $3.7 trillion off the deficit over a decade, presented earlier in the week by a bipartisan group of six senators and embraced by Obama, could hitch a ride on a debt-ceiling increase. The group hasn't produced details sought by leaders, said two Democratic aides familiar with the deliberations.
Senator Tom Coburn of Oklahoma, a Republican member of the group, said there is "no way" it could be acted on before Aug. 2.
Senate leaders have also discussed a fallback plan by Reid and Republican leader Mitch McConnell of Kentucky to give Obama $2.4 trillion in borrowing authority. It could be combined with spending cuts and a committee charged with pushing through longer-term deficit reduction in the coming months. That, too, faced mounting obstacles, with 86 House Republicans signing a letter dubbing the measure the "cut, run and hide" plan and vowing to block it.
Standard & Poor's warned there is a 50 percent chance it will lower the U.S. government's AAA credit rating by one or more levels within three months. S&P said yesterday that even if Congress raises the debt limit in time to avert a default it might lower the U.S. sovereign rating to AA+ with a negative outlook if it isn't accompanied by a "credible solution" on the debt level.
The higher the cuts and the more front-loaded they are the better the deal, even if it includes some modest tax hikes. Clearly Obama wants all the cuts back loaded, after the election when the next Congress might even undo it. Nonetheless, there appears to be a small window of opportunity to do something sensible but demagogues from both parties threaten that chance. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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