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Negotiators Look for Plan B After Brief Meeting

GOP Walks Away From Long-Sought Priorities

Brendan Smialowski/Getty Images
From left: Speaker John Boehner, President Barack Obama and Senate Majority Leader Harry Reid met with other Congressional leaders for debt talks Sunday, and they agreed to return Monday.

Updated: 11:19 p.m.

President Barack Obama and Congressional leaders emerged from a brief White House meeting Sunday night no closer to a deal to avert government default, just weeks ahead of their Treasury-imposed deadline.

The lawmakers huddled for approximately 75 minutes in Obama’s Cabinet Room. Though all were dressed in casual attire, the lack of neckties could not hide the tension in the room, according to Congressional aides.

Obama continued to push for a sweeping $4 trillion deal, including revenue increases opposed by Republicans and entitlement reform resisted by Democrats. But his push seemed to disregard the reality that Speaker John Boehner (R-Ohio) had announced his opposition to it Saturday night.

Boehner’s Conference, increasingly swayed by its tea party freshmen, would not be sold on any sort of tax reform, according to sources familiar with recent intraparty meetings, and both Republicans and Democrats emerged from Sunday’s gathering saying the leaders will focus on the package Vice President Joseph Biden had been negotiating with a bipartisan group before it broke down last month.

In perhaps the greatest sign of the shift in progress, House Majority Leader Eric Cantor (R-Va.), not Boehner, seemed to speak on behalf of his party in Sunday night’s meeting, according to Hill sources from both parties who were briefed on the gathering. Cantor rebuffed Obama’s drive for a “grand bargain” by continuing to insist that any new revenues must be offset with tax cuts in order for House Republicans to get on board.

Cantor had been a member of the Biden negotiations before walking away over an impasse on revenues. According to one Hill source, Obama pushed back when the Biden group was mentioned Sunday, saying Boehner had told him its work would be a tough sell in his Conference.

Congressional Democrats stood their ground on entitlements, with House Minority Leader Nancy Pelosi (Calif.) saying Democrats “continue to have serious concerns about shifting billions in Medicaid costs to the states” and would fight to protect Medicare and Social Security beneficiaries. A representative for Senate Majority Leader Harry Reid said the Nevada Democrat advocated “an approach that is balanced between spending and revenues, in terms of timing, specificity and dollars.”

The leaders will meet again Monday at the White House, and the president will address the media beforehand. When asked before Sunday’s meeting whether the negotiators could hash out a deal in 10 days, Obama responded, “We need to.”

Underneath the partisan division is the looming Aug. 2 deadline for raising the debt ceiling and the ultimatum from the president that he will not sign any debt limit deal that does not extend past the 2012 elections — a sentiment he reiterated Sunday, according to sources.

Leading into Sunday’s meeting, Boehner’s Saturday decision to jettison ambitions for a $4 trillion debt deal had both parties scrambling for an alternative plan to avoid defaulting on the nation’s debt.

The Ohio Republican shored up his right flank by standing firm against any hint of increased tax revenue, which would be required to strike a deal with Democrats at the $4 trillion range. But in doing so, he walked away from something that has seldom been in Republicans’ grasp: a Democratic president’s agreement to major changes to Social Security and Medicare — a political rarity and a top GOP priority.

And although the White House is pushing a larger deal with cuts to entitlements and a tax code reform, without Boehner, there won’t be one.
 
Republicans led by Boehner and Senate Minority Leader Mitch McConnell (Ky.) want a more modest package in the range of $2.4 trillion in cuts.

To some degree, it’s remarkable Boehner tried to negotiate a deal with significant revenue on the table at all in the face of skepticism from the other Republicans at the negotiating table: Cantor, McConnell and Senate Minority Whip Jon Kyl (Ariz.).
 
Both parties’ rank and file are under tremendous pressure not to make the kinds of compromises necessary to achieve a deal of any kind, and a smaller package could run up against some of the same competing pressures without the long-term payoff deficit hawks have demanded.
 
“Small deals are difficult, too,” Treasury Secretary Timothy Geithner said on CBS’ “Face the Nation” on Sunday. “Small deals involve a lot of pain as well. So it’s not clear that it’s easier to do less.”
 
Geithner added a deal would be necessary by the end of next week at the latest, and House sources have indicated that Members do not want to vote at the eleventh hour, as they did to avert a government shutdown in April.

Taxes have been the toughest part of the negotiations for months. Boehner was trying to find a way to sign on to a broad package that would include revenue but still allow him to claim it did not raise taxes. He wanted the package to only generate net tax revenue from economic growth spurred by a simpler tax system, not from tax code changes themselves, according to a Republican source. Such a move would be in keeping with Grover Norquist’s anti-tax pledge.
 
The White House wanted to extend the 2001 and 2003 tax cuts for the middle class beyond their expiration in 2012, but not the tax cuts for the wealthiest Americans. According to Democratic aides, that was combined with a commitment from the president to do tax reform that would lower overall rates. Democrats also were eyeing a payroll tax cut upfront, as well as relief from the alternative minimum tax.

Boehner insisted on a trigger that would generate more spending cuts if tax reform wasn’t enacted, which was also a no-go for Democrats.
 
Democratic aides pinned the blame for the deal’s collapse less on Boehner and more on other Republican leaders and on the pressure from Boehner’s right flank against any kind of deal at all.
 
McConnell put the blame squarely on Democrats in an appearance on “Fox News Sunday.”
 
“We have 9.2 percent unemployment, and their prescription is to raise taxes?” he said. “The president didn’t think that was a good idea in December, and they think it’s a good idea now?”
 
Earlier in the day, White House Chief of Staff William Daley emphasized that the president’s intent is to persuade Congressional leaders of both parties to “send a statement to the world” about America’s fiscal stability by focusing on the $4 trillion deal that looked possible as recently as Saturday morning.
 
“This is a very tough political fight, no question about it,” Daley said on ABC’s “This Week.” “But he didn’t come to this town to do little things. He came to do big things.”
 
After Boehner made his announcement Saturday night that the “best approach” would be to pursue a smaller measure, Democrats attacked Republicans for walking away from a serious challenge, painting the Speaker as a leader beholden to a conservative caucus adamantly opposed to government spending and skeptical of the seriousness of Geithner’s warnings of a catastrophic default.
 
“It’s tough on him. It’s going to be tough on all the leaders up there, but we have no option except to come together,” Geithner said on CBS.
 
Boehner’s walking away from the larger deal, though, preserves a political line of attack for Democrats: that they are the guardians of the social safety net in difficult economic times. Such positioning, particularly in the runup to the 2012 elections, would have taken a hit if they would have agreed to Obama’s deal to alter Social Security and Medicare.
 
And Obama can argue to the public that he tried to rise above the fray by asking all sides to sacrifice, but couldn’t find a willing partner.
 
One top Democratic aide said he believed Obama and Boehner had both been acting in good faith, so they “could go down in history as the second coming of Reagan-O’Neill,” referring to the good political and personal relationship that President Ronald Reagan and Speaker Tip O’Neill (D-Mass.) enjoyed. But, the aide said, the details proved too much for the troops they represented to stomach.
 
John Stanton and Jessica Brady contributed to this report.

Editor's Note:

This article updates the print version to include information from the Sunday debt negotiations between President Barack Obama and Congressional leaders.

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