The Price of Politics (36 page)

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Daley assembled the senior team in his corner West Wing office. The president was at $800 billion in revenue, substantially less than the Gang of Six’s $1.2 trillion.

That $800 billion itself could be a “killer,” Sperling said, because it was dependent on the elusive white whale of tax reform. They could chase tax reform all over the oceans and come back with nothing, as many Democrats were warning. “We’ll say $800 billion,” he said, “they’ll say zero.” So $800 billion might be too light, not enough.

Nabors agreed. “It’s either zero or $800 billion, depending on who you are.” The Gang of Six had changed the playing field. The $800 billion, he said, “looks really low in a world in which you’ve got Republicans who are willing to sign off on a higher revenue number. The Norquist pledge sort of has a hole in it all of a sudden. And so in a world in which President Obama needs to get 120 votes potentially, this is going to be tough. How do we explain this to Democrats?” Many in the party thought the White House cut bad deals, for example, the extension of the Bush tax cuts the previous year. “Just this day Republicans signed off on more revenue.” Or, at least, three Republican senators had.

How about an extra $400 billion? That would take it to $1.2 trillion. If three Republicans—Chambliss, Crapo and Coburn—could go as high as $1.2 trillion, surely the president could not be much lower.

Would Boehner freak out?

“Look,” Nabors said, “let’s just talk to them. Let’s just say, ‘Look, we don’t have the votes here, can we talk about this?’ ”

It would be a feeler. Several of them mentioned that the $800 billion number had been hard-won. They should not overplay their hand.

“You know what?” Nabors finally said. “I’m just going to float it
as my idea.” The son of an Army general, he knew about probing the enemy lines for weakness. He would, of course, run it by the president to make sure he approved, but by floating it as his own, Nabors would give the president some distance. He would ask for $1.2 trillion as the revenue number.

Daley gave the go-ahead, and Nabors explained his plan to the president. He would present the $1.2 trillion in his voice as a former deputy budget director and former House Appropriations Committee staff director. His plan was to say, “I’m just trying to get a deal. Is this something that can work? This isn’t big macro politics.”

Give it a shot, Obama said.

Nabors called Barry Jackson. He would prepare a formal offer under his name suggesting an increase to $1.2 trillion in revenue.

“We have to see how this shakes out,” Jackson said, noncommittally. “We don’t have any read of what’s going on yet.”

There had been no explosion from Jackson, Nabors told Daley. They were considering it. “You know what?” They seemed okay. “They understand.”

There was this weird dance with the offers going back and forth, Nabors thought. They would want more entitlement cuts, and the White House would want more revenue. Every time one would go up, the other would go up. Enough crap, Nabors figured. Time to rip the Band-Aid off. When he was done he had a three-page offer and sent it at 6:27 p.
¹⁸⁸
m., clearly labeling it “Nabors draft.”

“Barry,” he said, “this is it. It’s just me.” He did not mention that the president had approved it.

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When Jackson and Loper read it, they saw that Nabors left the debt limit increase blank. “$X Billion,” it said. On revenue, he proposed the $800 billion plus what amounted to about $400 billion more, for a grand revenue total of $1.2 trillion.

“Whoa, whoa, whoa, whoa!” Jackson said. There it was in writing. He was dumbfounded.

“We can’t do this,” Loper said.

“It’s a walk-back,” Jackson told Boehner. Here they were in the middle of what were essentially secret negotiations with the White House, and the president comes out and throws his arms around the Gang of Six? Yes, it was the same framework—but these were very different numbers. The Nabors offer would trigger a whole additional round of offers and counteroffers.

Maybe the White House was trying to drag this out for some reason? But that made no sense. Geithner had read them all the riot act. They had a hard deadline.

Boehner was frustrated. He was willing to talk, and negotiate, about revenues. But in his mind, it was really about getting the economic engine of the country going again. It was about growth. And the things hampering growth were out-of-control spending and entitlements. He didn’t, of course, want to quantify the revenue number. It was too explosive for his conference: Revenue meant taxes. But tax reform and economic growth were the remedies. The administration’s demand that they get specific on the revenue debate confounded him. Numbers were poison. In the next 10 years the federal government was by all projections going to collect at least $38 trillion in revenue. And the debate had been about $800 billion—about 2 percent of that total. “It’s minuscule,” he said. But now the White House was talking about $1.2 trillion.

“Look,” Boehner said, “we’re not going to have time. I don’t know why the president’s walking back on this, but I’m done. We had an agreement. He’s broken the agreement.”

Those were Boehner’s words, but he and Cantor decided that the best short-term course of action was to wait it out. Obama had invited them to the White House the next day.

In the meantime, Boehner had to make sure they did not default. The president was not a productive player now, so the speaker told Jackson that the focus would have to be on what could be worked out with the Senate—Reid and McConnell. So Jackson kept working with David Krone in Reid’s office, and Loper with McConnell’s key staff person, Rohit Kumar, trying to line up a Plan B.

• • •

The conservative intelligentsia, as they are called in Cantor’s office, did not react favorably to the Gang of Six deal, especially the revenue number. It was panned by the American Enterprise Institute, the Club for Growth,
National Review
and
The Wall Street Journal
.
¹⁸⁹
Saxby Chambliss acknowledged it was a big number, but said they would make it up through tax reform and growth.

Not possible, said the propeller-heads of the conservative movement. That’s a tax hike.

O
n Wednesday evening, July 20, Boehner and Cantor came to the Oval Office to review the bidding. The Republican leaders brought their senior staff—Jackson, Loper, Stombres and Bradley. Biden, Geithner, Lew and Nabors sat in for the administration.

They were close on a draft plan, Obama said, as he rattled off various cuts and savings. They were close on the cuts to the non-Defense, nonsecurity and nonentitlement spending. They hadn’t settled on the final discretionary number, on language for entitlement reform, or the all-important trigger. And the Gang of Six, Obama said, has made this more complicated on the revenue front. Your buddy Saxby, he said to Boehner, has put me in a hard position.

“Revenue,” Boehner said. “Mr. President, our necks are out as far as they can go.” The “up to” $800 billion was it, the upper limit.

Nabors worried that they were again talking past each other. Boehner kept calling it $800 billion but the Republicans were going to say it was all through tax reform and so it would effectively be zero. How was the president going to sell what House Republicans would call zero revenue to Democrats when conservative Senate Republicans like Chambliss, Coburn and Crapo said they needed at least to get $1.2 trillion in revenue? But Nabors did not say anything, and his $1.2 trillion proposal did not come up explicitly.

“Social Security,” Boehner continued. “I think there’s a way to stay out of the problem.” He mentioned a 75-year solvency test. The concept was they would avoid getting into particulars by just establishing a test on solvency. If the Social Security system was solvent in 75 years, then they would consider the problem solved.

“Let’s say it’s resolved,” the president said, jumping on an agreement quickly. One issue settled, pushed off to a distant future.

On the trigger, the way to enforce an agreement, Boehner said, the “ultimate trigger is the debt ceiling” but he had conceded that—a big concession.

“We can’t do that,” Obama reaffirmed.

“Decoupling sends people over the edge,” Boehner said, meaning not continuing the Bush tax cuts for the upper two brackets. Then the speaker played his best card. “If you’re going to have decoupling, we would need Obamacare.”

Awkward moment. Everyone tried to avoid the use of the pejorative, but there it was.

Ooh, okay, Cantor thought.

The trigger would have to contain two key parts of the president’s health care reform, Boehner said. If the trigger went off, these two elements would be repealed. First, the controversial Independent Payment Advisory Board (IPAB), which was supposed to find savings in Medicare and curb costs. Second would be the individual mandate that required all Americans to buy health insurance.

“Creative thought, John,” the president said. In other words, gut health care reform. No.

“Our members see a disincentive to act in the Senate,” Cantor said. If letting the Bush tax cuts expire is in the trigger, the Democratic Senate majority could let the trigger go off and they would have killed the lower rates for the wealthy, a big accomplishment. That might be worth everything to them. “That is a nonstarter for us.”

Why don’t you just put in there that if it doesn’t happen, then I’m impeached or removed from office? the president joked. Let me try to clear out the underbrush, he said. Medicaid and other health cuts need to be at $150 billion.

Cantor had been pushing for higher cuts, thinking they could do more. But the president seemed to be holding at $150 billion.

On the revenue side, Obama continued, you guys said you can’t do more. “The only thing I’m thinking about is, can we do some cats and dogs? Corporate stuff, close loopholes.”

Everyone knew these were small—$5 to $10 billion—and would have no impact except as symbolic political scalps. The president, apparently, wanted some.

“How do you explain that revenue plug?” Cantor asked. This was the $800 billion. The CBO score won’t help. CBO is going to score that as a tax increase. It’s not going to help us sell it when we’re seeing CBO go, that’s just a tax increase, and our guys are reacting negatively, obviously, on the Gang of Six.

We have to figure out, universally, Boehner said, how we’re going to talk about it. They had to know how each side was going to define and market this “so we’re not totally undermining each other’s arguments.” Though he had told Jackson he was finished with Obama, Boehner was talking as if they were still on track. He had invested so much, and so much was at stake.

“It has to be a jump ball for both of us,” the president said. He said he wouldn’t try to claim victory. “I won’t spike the ball,” he pledged, acknowledging the importance of perception. “I won’t dance in the end zone. I guarantee you that I will get more shit from my base. I’m going to get ripped for caving $1 trillion below where the Gang of Six was.”

Back to the trigger, he said, “You are right that health care spending is as sacred to us as decoupling is to you. But Medicare is the ultimate to us. Let’s talk crass politics: You will have Democrats that agree to Medicare cuts. That helps you.”

Boehner and Cantor acknowledged his point. It was McConnell’s constant theme. Republicans were being attacked for the drastic Medicare cuts proposed in the Ryan budget. If Democrats agreed to cuts in Medicare, that political argument was gone, or at least much less effective. Because, look, both parties voted to reform Medicare.

A cut of hundreds of billions to Medicare beneficiaries is significant, Jack Lew said.

Our guys don’t want to do it either, Boehner said. The pain isn’t shared equally. If it’s decoupling and you’re just playing around the edge of Medicare, this is not viewed as equal by our guys. “The trigger would have to raise more than the debt ceiling.” Boehner had consistently said that total deficit reduction would have to be greater than the hike in the debt limit.

Obama began listing what he would be giving up. “We’re immediately engaging in discretionary cuts” such as education and transportation. Plus more cuts in the nonhealth mandatory, such as federal civilian employment pensions. “Lots on the front end. Tax reform happens later.”

The president summed up, “The balance is, we are putting a big down payment with cuts but we don’t get the revenues until later.”

Boehner seemed to be nodding in agreement.

The cuts in education or transportation had to be set up front, Cantor said. “We don’t believe that the caps”—the plan to put 10-year limits on that spending in the law—“our guys don’t believe that they’re real after the first two years, after the next Congress. So we’ve got two years of caps at max.”

It was a point Larry Summers and others had always made to the president. Future Congresses could change the laws on spending to reflect their will. Instead of arguing with this fact, Obama tried to turn the tables. “We say the revenues are not real,” he repeated. Tax reform would be far downrange.

“We all want a broader base and lower rates. I’m concerned that there are progressive and regressive cuts to reform the tax code. The trigger ensures a regressive policy if hit.” From Obama’s perspective, the poor and underprivileged on Medicaid and Medicare would be hurt the most. So the trigger would be very bad for him if it went off. “I’m not trying to get a scalp. I’m trying to ensure that the fallback doesn’t hurt those who can least afford it.”