Congress ditches Obama on debt talks

Congress ditches Obama on debt talks

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Congressional leaders met at Boehner's office Saturday evening. | AP Photo

By MANU RAJU | 7/24/11 7:08 AM EDT

First came the Biden talks. When those blew up, the Obama-Boehner talks took center stage. And when that failed, the McConnell-Reid talks looked promising. And after they faltered, the Obama-Boehner talks tried to find a new life.

Now it’s all come down to the Boehner-Reid-Pelosi-McConnell talks to solve the debt crisis. Notably absent? The president.

That’s not to say Saturday’s congressional takeover went well.

In a frantic bid to avoid causing a worldwide economic disruption, debt negotiations have shifted wholly to Capitol Hill, as a frustrated President Barack Obama has taken a step back and allowed House and Senate leaders to try to find a way out of the debt-ceiling debacle. After congressional leaders told Obama at the White House Saturday morning they would attempt to stave off the crisis before Asian markets open Sunday evening, leadership aides raced to put together a framework that both parties could support.

With the president staying out of the picture, congressional leaders struggled to make progress on a temporary two-step solution that raises the debt limit with some offsetting cuts.

In an extraordinary Saturday evening session in the Capitol, House Speaker John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Nancy Pelosi (D-Calif.) sat around negotiating, on their own turf, without White House aides present.

The four smiled for the TV cameras during a photo-op at the top of their 50-minute meeting, but no one would say a word about whether they had made any progress.

“Bye,” Boehner told a reporter who asked about whether he could reassure the country a deal could be reached.

But after the cameras left Boehner’s office, talks grew tense as the four argued over the contours of a package that could define the next 16 months of the congressional and campaign season - and have widespread economic implications.

Reid was “very angry” in the meeting with Boehner and McConnell, according to a Democratic official. Following the meeting, Pelosi escorted Reid back to her office because she didn’t want the furious majority leader to say anything to the press. Reid is “adamant” about no short-term extension of the debt ceiling, the official said.

For Republicans, taking the talks out of the White House has at least something to do with optics — very few Republicans want to vote for a deal with Obama’s name attached to it.

House conservatives have grown deeply distrustful of Obama’s motivations and were skeptical of the “grand bargain” Boehner was negotiating with the president. He didn’t share the details of his negotiations with the House Republican Conference and many of them were privately concerned about any agreement between Obama and the speaker, particularly on the thorny issue of tax increases.

During tense negotiations Saturday night, Reid and Pelosi signaled a willingness to consider a GOP idea to enact a two-step process, calling for trillions of dollars worth of spending cuts and extending the debt ceiling by $2.4 trillion through 2012. The idea was similar to one Obama rejected in his talks with Boehner about a week back - but White House officials weren’t in the room Saturday evening.

But the leaders bitterly disagreed about the details.

Under the plan, Congress would make $1 trillion worth of spending cuts — mainly to domestic discretionary spending accounts, with no tax increases. The national debt limit would increase by about the same amount, allowing the borrowing limit to be extended until January 2012.

The fight now appears to center more around the process, rather than the substance of the cuts and whether to add new tax revenues. Democrats want to extend the borrowing authority all the way through the 2012 elections, while the Republicans demanded that the second part of the debt-limit increase should be tied more closely to enactment of future budget cuts.

To make deeper cuts in the next 10 years, the two-step proposal would create a new special committee of lawmakers who would recommend by the end of 2011 a more robust series of deficit-reductions. Republicans wanted to tie the success of that committee to the second debt-limit increase, an idea that Pelosi, Reid and Obama firmly rejected.
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“That means we’ll be right back where we are today a few months down the road,” said a Democratic aide. “We are not a banana republic. You don’t run America like that.”

With rating agencies warning about downgrading the United States’ credit, which could lead to a surge in interest rates and a shock to the markets, Democrats say a longer-term extension is critical to soothe the world economy.

But both sides are also plainly worried about 2012 campaign politics: Democrats in the Senate have to defend 23 seats and Obama has to worry about reelection, and neither Reid nor Obama want to relive this messy battle over the debt ceiling before November 2012.

McConnell, in particular, wants to force endangered Democratic incumbents to cast controversial votes to raise the debt limit at a time of record deficits, though that would create a problem for Boehner’s House majority, too.

Leaving the Senate Saturday night with his security detail trailing behind, Reid looked at the ground, tired and frustrated and said he was on his way to eat his first meal of the day.

“No,” Reid said when asked whether he felt encouraged by the day’s negotiations. He added that “it’s up to the Republicans” if there’s a deal by Sunday evening and later accused McConnell and Boehner of “intransigence” as the country faced an unprecedented default.

Michael Steel, a Boehner spokesman, said that “defaulting on the full faith and credit” is not an option, and that a two-step process is now inevitable since Democrats had yet to put forward a plan of their own to cut spending and raise the $14.3 trillion debt ceiling.

Moreover, by focusing on talks with Senate Democrats, Republican leaders want to drill home the point to House members that Boehner is working on “new legislation,” not the plan floated by McConnell earlier this month to set up an elaborate process giving Obama the authority to raise the debt limit so long as Congress can vote against it. That plan drew fierce blowback from House conservatives, even as McConnell began back-channel talks with Reid to put more teeth into their so-called Plan B.

But in Saturday’s talks, the leaders discussed parts of the McConnell proposal - the part where they try to protect their political hides. The leaders discussed the possibility of allowing lawmakers to cast a vote of disapproval once Obama requests the second tranche of a debt-ceiling increase. And the idea of adding a commission of lawmakers was borne out of discussions between McConnell and Reid.

“Speaker Boehner has informed us that he will work on a new path forward with Leader Reid to develop a solution that will prevent default, without job killing tax hikes, while substantially reducing Washington spending,” McConnell said.
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On a conference call with House members Tuesday afternoon, Boehner made clear he would avoid the McConnell approach and instead focus on trillions matched up with an extension to the debt-ceiling increase, participants on the call said.

The direction of the talks isn’t particularly appealing to Obama, but from the White House perspective, Congress is taking the lead on an issue that was always theirs to resolve. White House aides have long said that finding a way to raise the debt limit is the job of congressional leaders, not the president.

But with so much at stake, the president has been clear on his top demand: no short-term extension. Beyond that, the parameters of an acceptable deal to the White House, at this point, remain somewhat murky.

Despite the breakdown in talks with Boehner, top White House officials held out hope that the parties could still come to agreement on a large-scale deficit reduction package, saying the offer was still on the table.

“The speaker withdrew from the talks. So this plan is — this offer is still available,” a senior administration official said.

Boehner, however, sounds like he wants to now focus on counting the votes in his caucus to get a plan through his chamber before the crucial Aug. 2 deadline.

After the deal collapsed Friday, Boehner took to the phones to talk to his colleagues in a rare Saturday conference call, and he made sure to include a bit of chest thumping. He told them there never was a deal with the president, and included a message he delivered to the Obama.

“As I read the Constitution,” he recalled telling Obama, “the Congress writes the laws and you get to decide what you want to sign.”

Carrie Budoff Brown, Jake Sherman, Jonathan Allen and John Bresnahan contributed to this report.




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Barack Obama accuses the US Congress of risking a global banking catastrophe as debt talks collapse

Angry president lashes out after Republicans walk away from talks on borrowing limit, raising the spectre of US default

* Paul Harris in New York
* The Observer, Sunday 24 July 2011


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Obama said he had been 'left at the altar' by the Republican party after debt ceiling talks broke down again at the weekend. Photograph: YURI GRIPAS / POOL/EPA

Talks to stave off a potentially catastrophic US default on debt payments were in crisis as Republicans and Democrats struggled to avert a disaster that could trigger a global economic crisis.

Both sides agree that the US needs to pass legislation to raise its debt limit above its current level of $14.3 trillion (£8.7tn). But negotiations collapsed in acrimony late on Friday over details of a package of spending cuts and tax rises that would help to pay for such a move.

A visibly angry President Barack Obama attacked the Republican Speaker of the House, John Boehner, for refusing to return his phone calls and then abandoning the negotiations. "I've been left at the altar now a couple of times and I think that one of the questions that the Republican party is going to have to ask itself is: can they say yes to anything?"

If agreement is not reached, it could trigger what had once been unthinkable: a US default on its debt payments. If that happened, most experts predict, it would see a plunge in stock and bond markets worldwide that would threaten a new great recession. The deadline for agreement is just over a week away, on 2 August.

Though most people still expect a deal of some kind before then, preparations for the worst are being made. Obama is being briefed by senior officials on the consequences of default on Wall Street, and major banks and institutions are laying the groundwork for survival investment strategies. "I still believe in the end we will avoid default, but we are playing with fire," said Larry Haas, a former official in the Clinton White House.

Others put it even more bluntly. "Members of Congress are juggling with hydrogen bombs," said Professor John Pitney, a political scientist at Claremont McKenna College in California.

In order to thrash out a deal and get talks started again, Obama ordered top congressional leaders from both parties to meet him at the White House and explain how they were going to move forward. That demand showed the seriousness of the situation, but also raised the prospect that some sort of "fallback option" could emerge that would see a short-term rise in the debt ceiling. However, such a plan would only be likely to delay the problem until later in the year.

The Republicans have shifted dramatically to the right on economic matters, especially taxation, in the wake of the rise of the Tea Party. The Republicans captured the House of Representatives last year with the help of a number of new members the Tea Party supported. Many Republicans have signed pledges never to agree to tax rises of any sort and fear a backlash from supporters if they agree to a debt deal that includes attempts to raise money from wealthy Americans and big corporations.

Instead they want a settlement that focuses on slashing programmes such as social security and health spending on the poor and elderly, as well as defence and other parts of the government. So far Obama has sought to accommodate Republican demands and offered more than $1.6tn in government spending cuts, but only in return for tax rises on the rich. That has not yet been enough to bring Republicans on board.

In a letter to Republicans in Congress, Boehner said: "The White House is simply not serious about ending the spending binge. A deal was never really close."

Obama is also coming under serious fire from Democrats, who accuse him of being a poor negotiator and too willing to meet Republican demands at the expense of the liberal wing of his own party. Many Democrats have been horrified at the concessions he has already made on cutting government spending on the poor, sick and elderly. They argue that the most vulnerable Americans would pay the bill for a crisis that began on Wall Street. Leading progressives have slammed Obama's tactics and fear that he may agree to even harsher cuts.

Progressive groups, like MoveOn, have sent out campaigning letters and urged phone call protests as a way of persuading Democrats not to back the cuts. "It is tragic what is happening right now," said Robert Greenwald, a Hollywood director turned progressive documentary filmmaker. Greenwald said ordinary Democrats felt betrayed by Obama. "If he agrees a deal that has these cuts, then the president has done a disservice to millions of people who worked for him to get him elected; who believed in him and who fought for him."

A CNN poll last week backed Greenwald's comments. The survey showed that Obama's approval rating among liberals has dropped to 71%, the lowest level of his presidency.

That, however, may not worry the White House as it focuses on the 2012 election. Some observers believe liberal voters will still turn out in force again to vote for Obama. "Obama has flexibility to move to the right, because he believes progressives will still vote for him. They have nowhere else to go," said Pitney.

But there are signs of growing anger and revolt in the party as Democrats scramble to protect America's already shaky welfare programmes. A few voices are even whispering of searching for someone to lead a primary challenge against Obama. "Who knows? Maybe there will be a challenge from the left. If progressives are disgusted enough, I would not rule it out. It would send a message," said Haas.

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Boehner: GOP ready to act alone on debt deal

APBy BEN FELLER - Associated Press,DAVID ESPO - Associated Press | AP – 2 hrs 9 mins ago

WASHINGTON (AP) — With bipartisan debt-limit talks deadlocked, House Republicans and Senate Democrats readied rival emergency fallback plans Sunday in hopes of reassuring world financial markets the U.S. government will avoid an unprecedented default.

In a conference call, Speaker John Boehner summoned his conservative rank and file to swing behind a "new measure" that could clear both houses of Congress.

"It won't be 'Cut, Cap and Balance' as we passed it," he said, referring to a measure — killed in the Senate on Friday — that would have required spending cuts of an estimated $6 trillion as well as congressional approval of a constitutional balanced budget amendment for ratification by the states.

The new approach is "going to require some of you to make some sacrifices," he added, according to a person familiar with his remarks.

Separately, President Barack Obama invited the two top congressional Democrats to a highly unusual White House meeting Sunday evening.

One of them, Senate Majority Leader Harry Reid, was at work on a Democratic fallback measure, too.

Without congressional action by Aug. 2, the Treasury will be unable to pay all its bills, risking a default that could have severe consequences for the U.S. economy and the world's, too.

Details of the rival plans were sketchy.

Republican officials said Boehner envisioned an increase in the nation's debt limit by $1 trillion and slightly more than that in federal spending cuts, with the promise of additional progress on both sides of the ledger if Congress could agree.

Democratic officials said Reid was at work on legislation to raise the government's debt limit by $2.4 trillion — enough to assure no recurrence of the current crisis until 2013 — and reduce spending by slightly more.

They said that plan envisioned no higher taxes.

Administration officials have stopped just short of promising to veto the approach Boehner outlined. Obama has also said for months any bill must include higher revenue.

The White House was largely consigned to a spectator's role on a weekend that began with Boehner's decision to call off talks with Obama.

But the president arranged an early evening meeting with Reid and House Democratic leader Nancy Pelosi.

Asked earlier what the administration's plan was to avoid default, Treasury Secretary Timothy Geithner said, "Our plan is to get Congress to raise the debt ceiling on time."

The state of play veered between bipartisanship and brinkmanship on an issue of immense economic consequences.

Despite hours of compromise talks in the Capitol, lawmakers' aides had so far been unable to agree on a two-step plan that would satisfy Obama's demand for a large enough increase in the debt limit to tide the Treasury over until after the 2012 elections.

Interviewed on Fox, Boehner said, "I would prefer to have a bipartisan approach to solve this problem. If that is not possible, I and my Republican colleagues in the House are prepared to move on our own."

He arranged to brief the Republican rank and file on a conference call late in the day.

It was unclear when Reid would disclose details of his own plan.

The officials who described the rival fallback plans spoke on condition of anonymity, citing the sensitivity of the issue.

Boehner's plan, still under negotiation on Capitol Hill, is intended to get the nation beyond this crisis and snag enough votes from House Republicans who won't raise the debt limit without spending cuts, too.

Deeper and more complex reductions in the nation's deficits would be part of the deal, but under later timelines.

White House chief of staff William Daley said Obama was insisting that any package must expand the debt ceiling beyond the next presidential and congressional elections and into 2013 to provide economic certainty. Daley said anything short of that would be a gimmick and prompt the world to say: "These people just can't get their act together."

White House and congressional leaders talked past each other on the Sunday TV shows as negotiations unfolded in secrecy.

"There will be a two-stage process. It's just not physically possible to do all of this in one step," Boehner said. "I know the president is worried about his next election. But, my God, shouldn't he be worried about the country?"

Republican leaders called their rank and file back to Washington earlier than expected for the new work week and set a mid-afternoon Monday meeting to go over the debt-limit legislation.

With an eye on the financial markets, Geithner insisted anew the United States would not default.

"It's just unthinkable," Geithner said. "We never do that. It's not going to happen."

The debt deal-making has consumed Washington for weeks and has put on display a government that at times risks utter dysfunction.

Even after talks about between Obama and Boehner broke down in spectacular fashion Friday, Geithner said the two men were still negotiating.

He also suggested the ambitious framework the two leaders had discussed, targeting a deficit reduction of $4 trillion, remained under consideration.

"I don't know. It may be pretty hard to put Humpty Dumpty back together again," Boehner said of that grand plan. "But my last offer is still out there. I have never taken my last offer off of the table and they never agreed to my last offer."

That last offer included $800 billion in new tax revenues as part of a broad overhaul that would lower tax rates. Obama wanted $400 billion more in tax revenue for deficit reduction to help balance out the spending cuts. Or, if not that, a reduction in some of the proposed cuts being discussed to entitlement programs such as Medicare.

The talks halted primarily over that issue and over how to ensure that both parties kept their reform promises in the months ahead.

Any plan must get through the Democratic-run Senate, where Majority Leader Reid has called a short-term debt limit expansion unacceptable.

Obama's role looms, too.

Asked if Obama would veto a plan that did not extend the government's borrowing authority into 2013, Daley said, "Yes."

One key Republican lawmaker scoffed.

"I think that's a ridiculous position because that's what he's going to get presented with," said Sen. Tom Coburn, R-Okla.

Under any scenario, Washington's leaders have run themselves almost out of time.

It will take days to move legislation through Congress. A default could cause catastrophic damage to the standing and the economy of the United States.

Daley said, in fact, the consequences are already taking hold.

"I don't think there's any question there's been enormous damage done to our creditworthiness around the world," Daley said.

Boehner appeared on "Fox News Sunday." Geithner was on Fox, ABC's "This Week" and CNN's "State of the Union." Daley and Coburn spoke on NBC's "Meet the Press," and Daley also appeared on CBS' "Face the Nation."

___

Associated Press writers David Espo, Alan Fram and Nedra Pickler contributed to this report.

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