Chances Of Long Term Debt Deal Collapse Amid Mutual Recrimination

It's still politics as usual in Washington.

Late yesterday, the chances that whatever deal Republicans and Democrats reach over the debt ceiling would be the kind of long-term deal being talked about only a few days ago died as Speaker Boehner announced he could not back any such deal that included tax increases:

WASHINGTON — Citing differences over tax revenues, House Speaker John A. Boehner said on Saturday night that he would pull back from joint efforts with President Obama to reach a sweeping $4 trillion deficit-reduction plan tied to a proposal to increase the federal debt limit.

On the eve of a second round of high-level bipartisan talks set for Sunday, Mr. Boehner issued a statement saying he would now urge negotiators to instead focus on crafting a smaller package more in line with the $2 trillion to $3 trillion in spending cuts and revenue increases negotiated earlier by Vice President Joseph R. Biden Jr.

“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Mr. Boehner said. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”

The decision was a major reversal for Mr. Boehner, a veteran Congressional deal-maker who along with Mr. Obama had been the major advocate for seeking a far-reaching deal that would have combined a debt limit increase with substantial spending cuts, significant changes in social programs like Medicare, Medicaid and perhaps Social Security, and as much as $1 trillion in new revenues. Following a secret meeting between the two last weekend, Mr. Obama went public with his own call for a broad package.

Almost immediately, the spin game began with the White House quickly claiming that Boehner backed out of a long term deal over tax increases on “the richest Ameriid cans”:

Boehner “couldn’t do revenues from wealthiest Americans,” a White House official said.

House Speaker John Boehner (R-Ohio) all but extinguished hopes for a big deficit reduction deal because he refused to support any tax increases for the wealthiest Americans, a senior administration official said Saturday night.

The White House official also disputed the charge that President Obama was not willing to give ground on entitlement programs, saying that is “not true.”

“[Boehner] couldn’t do revenues from wealthiest Americans, he walked away over that,” the official said. “They are telling people we couldn’t do entitlements, not true.”

New York Senator Charles Schumer drew the battle lines starkly:

The President has called the Republicans’ bluff by offering them exactly the type of grand bargain they said they wanted, only to have it rejected. Speaker Boehner had shown in the last week that, if it were up to him alone to decide, the nation would not be risking default to protect the wealthiest two percent of Americans. But in the end, neither the olive branch extended by the President nor the pragmatic streak shown by Speaker Boehner was enough to overcome the far right’s obsession with defending tax breaks for millionaires and other special-interest tax loopholes. Some on the Republican side would like to confuse the issue by pretending it was tax hikes on the middle class that they were trying to prevent, but none were ever on the table. This decision to reject the President’s offer means as much as a trillion-dollar gulf remains between the two sides on a debt limit deal, and Republicans should be put on notice that no matter how hard they try, their plan to end Medicare as we know it will never fill in that gap.

On the right, meanwhile, James Pethokoukis compared Boehner walking away from this long-term deal to Reagan walking away from a “bad deal” during the 1986 summer with Mikhail Gorbachev in Reykjavik, Iceland:

In the end, it was bit of a Ronald Reagan moment for John Boehner on Saturday. Just as the U.S. president walked away from a bad arms control agreement with Soviet leader Mikhail Gorbachev at Reykjavik, Iceland in 1986, the House speaker passed on President Barack Obama’s mega-debt reduction deal in Washington.

In both case, the asking price was just too high. For Reagan, it was lethal limitations on his Strategic Defense Initiative. For Boehner, it was a trillion-dollar tax distraction from America’s true fiscal threat: spending run amok: “Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes.”

(…)

Maybe Boehner also realized he was becoming a role player in an Obama-directed drama whose dramatic focus was securing a second-term for Obama. Either Obama got his big tax-hike deal and a) created a tea party revolt in the GOP, b) looked like a statesmen and c) partially deprived Republicans of a valuable line of attack in 2012 … or there was no deal, and Obama could hammer the GOP until Election Day for caring more about tax cuts for the rich than fiscal responsibility.

Boehner apparently will take his chances with door #2 and push for a roughly $2.4 trillion deal (with a debt ceiling hike, too) based on spending cuts already agreed to and some non-tax revenue raisers. Deeper spending cuts and structural entitlement reform would be better, but that is going to have to be a 2013 thing. Indeed, what entitlement reforms Obama was agreeing to were insufficient to Republicans.

The Reyjavik analogy that Pethkoukis uses is interesting because it is now generally understood that the 1986 summit, while seemingly having ended in disaster as Reagan got on a plane and flew back to Washington over what was reported as his refusal to give in on the Strategic Defense Initiative, was actually the beginning of a process that eventually led to the ground breaking arms control treaties of the last years of the Reagan Administration. Somehow, I don’t think that’s what we’ll see out of last night’s events. Today on CNN’s State Of The Union, House GOP Whip Kevin McCarthy said that the Republican caucus will not support any deal that included tax increases, more troubling though were the comments made by a Democratic Representative on the same show:

Democratic Rep. Chris Van Hollen, appearing on the same show after McCarthy, said Vice President Joe Biden’s negotiations only pinpointed about $1 trillion in cuts.

“Our Republicans colleagues are dreaming if they think we had $2.4 trillion in cuts,” Van Hollen said. “We were nowhere close to that. And again, they walked out, because they did not want to take away the tax breaks for corporate jets for the purpose of deficit reduction, oil and gas companies, and folks at the very top.”

You’ll recall, of course, that the Biden talks are the ones that Eric Cantor and Jon Kyl walked out of a few weeks back. That led to Speaker Boehner and President Obama talking directly, which led to the discussions that Boehner backed out of last night. So, it’s unclear exactly where we are right now. Treaury Secretary Geithner said this morning that a deal absoultely has to be made as soon as possible, and Republicans at least seem to recognize that. In fact, the parties will be meeting again this evening at the White House and its entirely possible we’ll have a deal by tomorrow morning. It’s not very likely though.

So far, it seems like the international equity markets are assuming that a deal will eventually be made and the debt ceiling will increase. The closer we get to the drop dead date without a deal, though, the more likely it becomes that the markets will start to reflect trader concern that there won’t be a deal at all. And that could lead to a market panic not unlike the one we saw in September and October 2008 while Congress was debating TARP. Perhaps that’s what it will take to get our political leaders to do what needs to be done here, but it would be so much easier if they’d ignore the radicals in their midst and just do what needs to be done.

 

FILED UNDER: Barack Obama, Congress, Deficit and Debt, Politicians, Taxes, Tea Party, US Politics, ,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. michael reynolds says:

    Republicans hate Obama more than they love America. This is a sick and sickening political party: fanatical, nihilistic and un-American.

  2. lunaticllama says:

    Democrats want to raise the debt ceiling. Republicans refuse and say they want a deficit deal and that government must be cut. Democrats floats trillions of dollars of cuts that their base hates, followed by Republicans walking away from a couple hundred billion dollars of tax cuts.

    To recap: Republicans intentionally create debt ceiling crisis because we need to reduce the debt. Democrats enter into negotiations and agree to a basic framework tilted towards Republican policy preferences, then Republicans run away because they can’t support Democratic ideas for deficit reduction. And we are supposed to believe that both sides are to blame? Really? This is a Republican-created “crisis,” but Republicans are refusing to accomplish their purported goal, i.e. debt reduction.

    What this shows is that Republicans do not actually care about the deficit or the debt. Their number one political objective is to protect corporate elites and redistribute wealth towards those elites. They would rather not reduce the debt than do anything, even change market distorting tax credits for the jet industry, that might hurt corporate elites. As the Ryan budget show, Republicans view the debt as a problem in so far as it will hinder future attempts to funnel large amounts of money towards the wealthy.

  3. Edvard M says:

    The White House Book: How to Negotiate and Be Bipartisan explains how this all happened from Obama’s side.

  4. MBunge says:

    You know, there’s a cottage industry of liberals who love to denigrate Obama’s political and negotiating skills, but this debt limit deal only illustrates why he’s the first President of my adult life whom I think really is a lot smarter than me.

    In the best cast scenario, he gets a debt limit and budget deal that might cause some problems with his base but will set off a civil war in the GOP.

    In the worst case, there’s a global economic crisis where he’s done everything you could possibly do to make the GOP take most of the blame.

    Mike

  5. john personna says:

    The Republicans are hung by their own soundbite.

    “No new taxes” works when things are good, but I think the ultimatum fails when solvency is on the line. How can anyone think this is the time for absolutism and ideology?

    Obviously, if this were some topsy-turvy world, and the Democrats were holding the line at “no spending cuts” they’d look as insane. But that’s not where we’re at.

    Not at all.

  6. mattb says:

    Spin always happens on both side. But its hard to ignore the fact that Bohner, by his own admission, has drawn the line in the sand that any steps to increase revenue are off the table.

    When one party refuses to give an inch, then all you can blame Obama for is showing enough spine to not give in.

    The comparison to Reyjavik is also weird because that negotiation wasn’t happening to try and prevent an impending nuclear war. In this case the negotiators are working against a hard date, with very immediate repercussions.

  7. mattb says:

    “Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Mr. Boehner said.

    Just reread that to be sure that made sense.

    What would be considered a “good faith effort to find common ground?” Military cuts? That’s the only thing I can think of. What other government institutions are there that the current GOP supports?

  8. reid says:

    Doug makes it sound like it’s a problem with radicals on both sides fouling up a compromise, when clearly it’s the Republicans acting like jerks here. Can’t you come right out and say it?

  9. reid says:

    mattb: Sounds like asinine duoblespeak to me. “We showed up ready to make a deal that gave us everything we wanted, but they wouldn’t do it, so….”

  10. john personna says:

    mattb, that quote is perfect because it combines “good faith” and “common ground” with an absolute, “without tax hikes.”

    You’ve got to be pretty far out on the ideological curve to think that those things go together.

  11. john personna says:

    BTW, I think Obama’s position caved weeks or months ago, when he started talking about “the richest Americans” and etc. He has pre-compromised to very small tax increases. That Boehner can’t accept those small increases shows how trapped (or nutty) he is.

  12. john personna says:

    One last thought … some up-thread think the Republicans have planned this, but I think they’ve got to be trapped.

    They’ve essentially won, but something prevents them from accepting the win.

  13. reid says:

    jp: .95 of a win implies .05 loss, and the tough Republicans and their tea party base just can’t have that.

  14. James says:

    @john personna:

    They’ve essentially won, but something prevents them from accepting the win.

    Exactly. Part of the problem is that conservative base has been so ginned up with opposition to any and everything that’s a part of Obama’s administration, cutting any deal becomes impossible. Once you’ve painted your opponent as a Socialist Kenyan Anti-Colonialist, you can’t really accept any compromises with a Socialist Kenyan Anti-Colonialist.

  15. steve says:

    The Republican JEC noted that successful debt cutting packages were composed of 85% spending cuts and a 15% increase in revenue. The no new revenue demand runs counter to their own data, which is already being spun to emphasize cuts.

    http://rortybomb.wordpress.com/2011/06/30/republicans-reject-the-republican-offer-on-deficit-cutting-mix-or-democrats-propose-the-aei-plan-on-tax-increases-vs-spending-cuts/

    Steve

  16. @michael reynolds:

    Once again, I’m a nihilist, and I’m extremly offended by your continuing assertions that what the Republicans are up to has anything to do with my worldview.

  17. tax increases on “the richest Ameriid cans”:

    So like what’s that? A deposit fee on expensive native american soda containers?

  18. An Interested Party says:

    In the best cast scenario, he gets a debt limit and budget deal that might cause some problems with his base but will set off a civil war in the GOP.

    In the worst case, there’s a global economic crisis where he’s done everything you could possibly do to make the GOP take most of the blame.

    Not bad from the Socialist Kenyan Anti-Colonialist…of course, to point out what you did obviously makes you an Obama Sycophant to some people…I’m just wondering, though, if the GOP continues to follow this playbook, and that helps the party to lose its chance at the presidency next year, will we hear the same tired arguments that the GOP lost because, darnit, they just weren’t conservative enough, again…

  19. Hey Norm says:

    Interesting how Boehner not being able to convince his caucus to be reasonable becomes “mutual recrimination” at the hands of Mataconis.
    The so-called republicans have shown their true stripes. Nothing matters to them but the wealthiest amongst us. Handed entitlement cuts they discover that tax breaks for yachts are more important to them. We can all see now that the debt means othing to the so-called republicans despite their rhetoric. They exist for the top 10%. As far as they are concerned the rest of us can f*** off.
    And Mataconis carries their water.

  20. Hey Norm says:

    Obama warned a long time ago that the sacred rhetoric of the so-called republicans left them no room to compromise or even negotiate. Now we see that he was dead-on correct.

  21. Jay Tea says:

    We’re closing in on our federal debt equaling our entire GDP. Toss in the current state of the economy and the White House and the Democrats in Congress saying we need to borrow even more and more money, and we’re looking at a situation where our debt is not only well in excess of our annual income (it’s about 175% right now), but more than our entire net worth.

    So let’s jack the debt ceiling up to 15 trillion. Or 16 trillion. Or 20 trillion. Or even a quadrillion. Then we can pass a law ordering banks to lend the federal government the money, threatening them with violating the 14th Amendment if they refuse.

    Let’s confiscate all the private corporate jets outright, and sell them off. Then let’s take the entire fortunes of the richest Americans and apply that to the debt, too.

    At some point, as Lady Thatcher noted, eventually you run out of other people’s money. We’re way past that point.

    There is absolutely no rational reason why federal spending skyrocketed since 2007, when the Democrats took over Congress. But I repeat myself. Hell, just cutting spending down to 2008 levels would be a huge improvement. Obama not starting new, stupid, pointless wars that aren’t “war-wars” would also help.

    But give the government more money? Sure, let’s wean the crackhead off the crack slowly. Just have them cut back, a little at a time, and they’ll soon figure out how to be more responsible.

    P. J. O’Rourke said it best: giving money and power to politicians is like giving whiskey and car keys to teenaged boys. You don’t just drain a little gas out of the tank and water down the whiskey in hopes they’ll learn their lesson.

    J.

  22. john personna says:

    I think Jay, that was a total non-sequitor

    It doesn’t seem to have much to do with walking away from a major budget cutting deal, just because it had a sliver of tax increase.

  23. Hey Norm says:

    JT…
    Actuay there is a “… rational reason why federal spending skyrocketed since 2007…”. Republican policies like unpaid for wars, unpaid for Medicare entitlement expansion, and unpaid for tax cuts, combined with a huge economic downturn caused by the above and massive de-regulation across multiple sectors. You can look at the debt going forward and see this clearly.
    http://www.cbpp.org/cms/?fa=view&id=3490
    Have a nice evening.

  24. Hey Norm says:

    It was over a year ago at a retreat of the so-called republicans that Obama, discussing the ACA that he would eventually get passed, said; “…I mean, the fact of the matter is, is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in your own party. You’ve given yourselves very little room to work in a bipartisan fashion because what you’ve been telling your constituents is, this guy is doing all kinds of crazy stuff that’s going to destroy America…”
    He warned them, and now has used their ideological rigidity against them. His Kung Fu is very strong.

  25. WR says:

    @Jay Tea: Yay Jay! We haven’t seen the Thatcher quote in days! Just when I was starting to feel liberal again, you convinced me with your brilliant use of the one phrase anyone on the right is able to repeat. Well played, sir, well played!

  26. WR says:

    @Jay Tea: By the way, I can think of one rational reason why spending “skyrocketed” once the Democrats took over. Obama insisted on putting all the spendiing for two wars into the budged. Bush left it off, paying for it with emergency supplementals so it wouldn’t show up.

  27. Jay Tea says:

    Obama’s idea of “compromise,” apparently, was a trillion dollars (that’s TRILLION) in new taxes.

    No thanks.

    J.

  28. ratufa says:

    Obama’s idea of “compromise,” apparently, was a trillion dollars (that’s TRILLION) in new taxes.

    It was a trillion dollars in new “revenues”, a phrase which also includes increasing fees (increasing Medicare co-pays would be an example of such a fee increase) , cutting tax loopholes, etc, in additional to possible tax hikes. It’s over a 10 year period. And, yes, if the deal includes spending cuts along with “significant changes in social programs like Medicare, Medicaid and perhaps Social Security”, that is a compromise on the part of the Democrats.

    My guess is that the Republicans would prefer a shorter extension that just includes spending cuts, because it better positions them for 2012, allow them to repeat the process, and may make it easier to put the blame on Democrats if they turn down such as deal.

    At some point, the debt ceiling will be raised. For people who think the Republicans might stand firm and not raise the debt ceiling (either before the deadline or shortly after), consider how not raising the ceiling will affect spending on Defense, Social Security, and Medicare/Medicaid, all of which benefit important Republican constituencies. You may may not care, but the Republicans in Congress certainly do, especially given the role of the senior vote in 2010.

  29. michael reynolds says:

    ratufa:

    I’m not so sure they won’t push the country into default. Boehner is a coward, and his party is insane. If they think they can pin the blame on Obama somehow they’ll do it.

    The question is how any decent, patriotic American can belong to the GOP. It’s gone from being like membership in the Communist Party in the 30’s (Okay, you were a bit slow to catch on,) to being like membership in the Communist Party in the 60’s (You know you’re part of something evil.)

  30. anjin-san says:

    Then let’s take the entire fortunes of the richest Americans and apply that to the debt, too.

    You’ve got to love it when they trot this one out. And it always sounds like it is coming from someone who drives a ’87 ford fiesta…

  31. Jay Tea says:

    @michael reynolds:

    Republicans hate Obama more than they love America. This is a sick and sickening political party: fanatical, nihilistic and un-American.

    Well-loved. Like or Dislike: Thumb up 19 Thumb down 7

    If anyone doesn’t recognize thesource, Mr. Reynolds is riffing (consciously or not) on Golda Meir’s observation that “there will never be peace as long as the Arabs hate Israel more than they love their children.”

    And readers agreed, almost 3-1, with this demonizing of fellow Americans.

    That about sums up the current state of the readership.

    J.

  32. sam says:

    @Jay Tea:

    “And readers agreed, almost 3-1, with this demonizing of fellow Americans.”

    Give us a break. You guys have made demonization of your political opponents a sacrament.

  33. WR says:

    @sam: Oh, now we’re all fellow Americans — now that Jay is playing the self-pity card. It seems like just yesterday that those who didn’t agree with him politically were evil commie fascist perverts who want to destroy the country. But now Jay’s feelings are hurt, because the people he calls monsters correctly point out the nihilism of his own party.

  34. michael reynolds says:

    @Jay Tea: No, Jay, it sums up the truth.

  35. Jay Tea says:

    I differentiate between “opponents” and “enemies.” I don’t recall ever lumping an entire segment of the American political spectrum into the “enemy” category.

    Yes, some on the right do. I either ignore them or call them out, as the mood strikes me.

    I sure as hell don’t defend them on their ravings, or applaud them.

    WR, I’ll give a pass to. He’s just plain stupid, and you can’t fix stupid. But michael… he’s smart enough to know better.

    It’s sad to see him so egged on.

    J.

  36. physics geek says:

    Jay,

    You know what I find interesting? All of your comments appear to get voted down enough to close them while pretty much all the lefty tripe gets multiple thumbs up.

    Hey guys, make sure that when you click the “like” button on the multiple computers you own that you do so from different IP addresses. Otherwise, you might find it harder to game the comments. Consider this an FYI. Because I’m a giver.

  37. john personna says:

    physics geek, learn what a hub is, and how it shares IPs

  38. john personna says:

    (As an aside, I rarely vote anyone up or down. I more often just respond with my own comment. I realize it says “like or dislike,” but I don’t think posts should really be hidden by mere dislike. It should be something more. Maybe each IP should only get 1 or 2 votes to “spend” each day.)

  39. Jay Tea says:

    John, you’re not understanding your ideological compadres. Some things are too bad to be allowed to be seen. And only they, in their collective wisdom, can properly determine what is so bad that it must be suppressed, for the good of the many.

    That’s how michael’s “all Republicans are racist, America-hating traitors” is “well-loved,” and my “how long we gonna keep piling up debt?” disappears.

    Far, far better to shut up one’s opponents, and call them whiners when they dare to mention it.

    J.

  40. matt says:

    Hey guys, make sure that when you click the “like” button on the multiple computers you own that you do so from different IP addresses. Otherwise, you might find it harder to game the comments. Consider this an FYI. Because I’m a giver.

    I know technology is hard and all but would it really hurt yourself to actually learn a little about a topic before commenting on it? Like JP said from the perspective of the server here all your computers are sharing the same IP. It’s not till the packets hit your router that the individual computer IPs come into play. So if your ISP gives you a dynamic IP you can usually force them to re-assign you new IP by powering down your modem for 5 or so minutes. There’s no guarantee you will get a new IP though and if you have a static or weekly assigned IP you’re pretty much going to have to rely on proxy servers to change your IP. As for proxy servers well I’ll just suggest you google that.

    TLDR : LUL INTERNETZ NUB!!

  41. anjin-san says:

    Jay… better grab a hankie if you plan on spending the entire day crying about liberal meanies…

  42. Jay Tea says:

    Ain’t doing any crying, anjin… just noticing which side has the fascistic impulse to hide dissent, and has no problems getting numbers on their side.

    Just be nice if you’d own it for a change, anjin. Explain why you voted down comments, knowing full well that would lead to their being hidden…

    J.

  43. Rob in CT says:

    On the comment voting thing: how about we all vote up comments we like, but refrain from voting down comments we don’t?

    I’ve started doing that, once I realized (remembered, really, because I’ve seen this vote up/down system before) that enough down votes hides the post.

    What’s the point of that? If a comment is nasty, stupid, just plain wrong or whatever then let it display such to the world, and then argue against it.

  44. physics geek says:

    The bait failed. I know more about IP addresses than the average bear, but I was waiting to see if enough thumbs down would hide it. Guess next time I’ll be sure to put something about ridiculous amounts of debt and spending to make sure that no one reads it.

    Anti-technology: good. Anti-Democrats: bad.

  45. anjin-san says:

    Well jay, since “conservatives” have been hiding comments by myself, Wr and others, not only are you crying, you are crying over unfairness that exists only in your rather oversized persecution complex.

  46. An Interested Party says:

    Guess next time I’ll be sure to put something about ridiculous amounts of debt and spending to make sure that no one reads it.

    Better still, write generalized diatribes telling us how horrible the president is and what a worthless person he is…and don’t forget a quote from Margaret Thatcher…and definitely don’t forget to whine about hidden comments as well…