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How the Obama-Boehner debt talks collapsed

Both sides seemed to think an accord was close. Then everything collapsed. Insiders describe what they think happened.

July 22, 2011|By Peter Nicholas and Lisa Mascaro, Washington Bureau
  • President Obama participates in a town hall discussion on efforts to reduce the budget deficit at the University of Maryland in College Park.
President Obama participates in a town hall discussion on efforts to reduce… (Michael Reynolds, EPA )

Reporting from Washington — President Obama believed that a deal was in sight when he spoke to House Speaker John A. Boehner on Thursday afternoon to work through some sticking points in the tense negotiations over raising the nation's debt ceiling. Would Boehner think it over and call back?

But the call never came. That in itself was unusual; Boehner always returned Obama's calls, a White House aide said.

At 3:30 p.m. Friday, an ominous email came to the White House from Boehner's office. Could the two men talk in two hours? The White House phoned and asked if they could talk right away.

No, came the response — 5:30 p.m. It was taken as another bad sign.

Just how bad became clear when the two men finally spoke, and Boehner said he was through talking to the White House.

For months, administration officials had been meeting privately with Republican leaders, striving for a broad deficit reduction package and a crucial vote to raise the federal debt ceiling.

Twice before, Republican leaders had walked away from the grand bargain that Obama envisioned.

But the two sides kept talking, and aides on both sides of the debate provided details of the last week's events on condition of anonymity in order to speak candidly.

On Friday, July 15, it seemed the perseverance had paid off.

That day, GOP leaders invited White House officials to Capitol Hill for a private meeting. On the White House side were Chief of Staff William Daley and Treasury Secretary Timothy F. Geithner. Representing the House were Boehner and Rep. Eric Cantor (R-Va.), the majority leader who has taken a leading role among the conservative flank.

The Republicans made an offer: between $3 trillion and $3.5 trillion in spending reductions, and nearly $800 billion in revenue increases over 10 years through overhauling the tax code. Geithner and Daley took it back to the White House.

On Sunday, Boehner and Cantor were invited to the White House for a private, unannounced meeting with Geithner, Daley and Jacob Lew, the director of the White House Office of Management and Budget. Obama, who was at church that morning, popped in a couple of times.

The White House was agreeable to parts of the deal — notably, the proposal for nearly $800 billion in added tax revenue.

"They were willing to accept our number," the GOP aide said. The group also talked about overhauling the tax code.

"We walked out of the room thinking we were making good progress on the tax reform," the aide said.

The meeting did not become public until Monday, and even then, the proposal was not disclosed.

On Monday, Republicans said they were waiting for the White House to provide a counteroffer on ways to make sure Congress would take up tax reform.

One way to do it would be to have a "trigger" in any debt ceiling legislation providing that if Congress did not act on tax reform, then tax cuts for the wealthy put into effect under the George W. Bush administration would expire.

The next day, however, a bipartisan group of senators referred to as the Gang of Six unveiled its own deficit reduction proposal that included more than $1 trillion in tax revenue.

According to the Republicans, that proposal changed the debate. Later Tuesday, the White House said it needed to see an additional $400 billion in new tax revenue, aligning it more closely with the goals in the Gang of Six proposal.

"They indicated that changed the dynamics of what they could do," the GOP aide said.

Republicans later would cite the $400-billion request as the reason the talks broke down, but negotiations continued at the time.

Boehner and Cantor went back to the White House on Wednesday. Discussions about the additional $400 billion in new revenue were secondary to concerns over tax reform "triggers."

Republicans thought they needed a trigger to ensure that Democrats stayed at the table and didn't simply let the Bush tax cuts lapse. The GOP proposal: If tax reform did not occur, the administration would lose key portions of its new healthcare law, including the mandate that all Americans have health insurance.

The White House dismissed this provision as a nonstarter. "We didn't think that it was appropriate that political trophies would be part of the budget discussions," said a senior White House aide.

On Thursday, important differences remained, especially in the amount of added tax revenues and the design of the triggers. Further, Obama sensed that Boehner was losing GOP support — "bleeding members left and right," said the senior aide.

To compensate, Obama hoped to reel in more votes from Democrats. Securing another $400 billion or so in additional revenue would help solidify Democratic support.

That number was negotiable, as the White House saw it. If Boehner wouldn't agree to that sum, maybe he would settle for less, and they'd make up the difference some other way.

"If you can't do that, then let's have another conversation," said a White House aide, summarizing Obama's part of the call.

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