The Price of Politics (47 page)

• • •

Around noon on Saturday, Nabors went to the Capitol to meet with Jackson. He proposed using a Gramm-Rudman-Hollings sequester as the trigger if Republicans would agree to eliminate the second-step debt limit increase.

We’re meeting with Reid and Pelosi later this afternoon to try to get them on board with the sequester, Nabors added.

Appreciate it, said Jackson. This might work.

Jackson and Loper took the White House idea to Boehner, who was amenable. The White House wasn’t demanding tax increases, and the sequester would be large enough to guarantee that the savings were greater than the debt limit increase.

• • •

Once again, the real negotiation was between Biden and McConnell. As the McConnell whisperer, the vice president’s primary task was to move McConnell off the idea of a two-step debt limit extension. They talked early that afternoon.

Biden stated flatly that the extension had to last 18 months, to take them beyond the 2012 election. It was a nonnegotiable demand, he said. As McConnell himself had heard two weeks earlier, the president was not going to give on this even if it brought his presidency down. He was not going to be blackmailed on the debt ceiling every six months.

In effect, the president was saying he could be blackmailed, but only once. They were not going to go through these exhausting, hair-raising negotiations twice a year, Biden insisted.

McConnell had a bottom line also. Of course, it was about taxes. There could be no automatic tax increase in the trigger or sequester. If a joint Senate-House committee could not reach agreement on $1.2 trillion, the trigger could go off but the money would not, under any circumstance, come from a tax increase. It would have to come from spending cuts.

Biden and McConnell, both suffering from severe cases of deal maker’s fatigue, finally agreed: a full 18-month debt limit extension and no automatic tax increase in the trigger.

One for you, one for me.

They had staff work out the details. Reed, Lew and Sperling represented the White House. McConnell’s chief policy aide, Rohit Kumar, represented McConnell.

But there were lots of other details.

“Is there any way we can have Medicaid on the table?” Kumar inquired in a telephone conference call between the Senate and the White House later that day. “It would be important for us if we could have Medicaid in the trigger.”

“We can’t do that,” replied Sperling, trying to stay calm. “This is a core.” Medicaid provided health insurance and services to more than 50 million poor people. “There has never been a low-income program in a trigger before. This would be the first ever. There’s no way we can do it.”

Lew had been listening carefully. Back in the 1980s he had negotiated the low-income exemptions in the Gramm-Rudman deficit reduction law. In all the discussions with Boehner, McConnell and their staffs it had been clear that low-income programs were not going to be part of any deal. Lew could not believe that this was being raised at the 11th hour.

“Gene,” he said to Kumar and Sperling, who were on the speakerphone, “I don’t mean to interrupt you, but we’re not talking about Medicaid.” Suddenly he was shouting into the phone. “You don’t have to explain this to him, Gene! No! No! No!”

“Okay,” Kumar said. “We’re not going to have a conversation where people are yelling. So we will continue.” He said good-bye and hung up.

• • •

Lew decided to report to the president on the Medicaid dispute. He was deeply offended that the Republicans who had been unable to move an inch on taxing the wealthiest citizens would propose automatic cuts to the poorest. Over the decades, he felt he had learned how to be flexible and cut reasonable deals with Republicans. There was, however, a line that should not be crossed. It wasn’t as if the administration
had spent the last three months of negotiations proposing some confiscatory tax policy. All they wanted was for the wealthiest to pay the tax rates from the Clinton years, when the United States had had the longest period of economic growth in its history. If everything, including taxes, had been on the table, this would not have been hard to solve.

So here was Rohit suggesting that if Congress couldn’t do its job and reach agreement on a second $1.2 trillion in cuts, those who would pay would be the poor, the disabled, the mentally ill? Was that the kind of country they were?

He went to the Oval Office. Mr. President, I just absolutely blew the idea of Medicaid in the sequester out of the water, he said, and provided the details of his explosion, exactly what he had said.

It was the right thing to do, the president said.

Lew and Kumar soon resumed their conversation. Lew would not give on Medicaid, and Kumar finally dropped the idea.

• • •

Reid’s bill to use $1 trillion in Iraq and Afghanistan “funny money” to fund the debt limit extension still hadn’t passed the Senate, but Boehner was already planning a vote in the House. He wanted to demonstrate that Reid’s bill couldn’t pass. After all, the Senate had already tabled Boehner’s bill.

Pelosi called the House Democrats together to review Reid’s proposal. Though they were a weak minority, Reid wanted the House Democrats to stick with him, arguing that a strong vote in the House would strengthen his hand.

The first person who would say he didn’t like the Harry Reid bill would be Harry Reid, Van Hollen said, but the next piece of legislation, written by House Republicans, would be worse.

As an indication of their distrust of the Senate’s Democratic majority and its leader, many of the House Democrats protested that their support would be interpreted by Reid as a license to give more. The Reid bill had no tax increase. They agreed finally to let Reid know the margin for error was very small. A number of the Democrats also said
they would vote for the Reid bill because it would give them an opportunity to vote for lifting the debt ceiling and to demonstrate how responsibly they were acting. It would be useful political cover if they wound up voting against the next debt limit bill, which would likely be worse and have Medicare cuts.

The House defeated the Reid bill at about 3:15 p.
²³⁸
m. by a vote of 246–173. No Republicans voted for it, and Reid lost 11 House Democrats. It was, however, one more meaningless exercise. The bill had been soundly defeated. But Reid, unhappy because he was being left out of the Biden-McConnell negotiations, was going to soldier on.

McConnell went to the Senate floor that afternoon and, after offering the usual pabulum about “my good friend, the majority leader .
²³⁹
 . . there is nobody in the Senate I respect and admire more than my counterpart,” said he had just delivered a letter to Reid signed by 43 Republicans saying they would not vote for his bill. Gnawingly, he quoted the majority leader’s own words from 2007: “In the Senate, it has always been the case, you need 60 votes.”

So, dead in the House and dead in the Senate.

• • •

Obama invited Reid and Pelosi to the White House.

I’m going to give on the tax trigger, he said. He had concluded that it was an absolute red line for the Republicans. Reid and Pelosi said they were not ready to concede.

• • •

McConnell knew how to rub it in. He and Boehner were working closely, and they decided to appear together at a press conference that afternoon, underscoring Republican unity. Fox News broke into its regular programming with a “Fox News Alert” as McConnell seemed to suggest congressional Democrats had been cut entirely out of the negotiations with the president.

“We are now fully engaged, the speaker and I, with the one person in America, the one in 307 million, that can sign this bill into law,” McConnell said.
²⁴⁰

Later that afternoon, Reid, still furious, went to the Senate floor to say that McConnell’s claim was false.

“Members of the Senate, that’s not true,” Reid said.
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The White House had talked to McConnell, but “not in any meaningful way.”

Standing some 10 feet away from Reid, McConnell responded. “The fact is that the only way we are going to get an agreement before Tuesday is with the president,” McConnell said.
²⁴²

Despite the “my good friend” language, the two leaders might as well have been spitting at each other.

“While the Republican leader is holding meaningless press conferences,” Reid said, “his members are reaching out to me.”
²⁴³

McConnell said they should just vote.

“We are here today,” Reid said, “right now, for this reason: It’s spelled f-i-l-i-b-u-s-t-e-r.
²⁴⁴
It’s unconscionable that the Republicans would filibuster us to default.” He continued, “You can put lipstick on it, a nice suit, even a skirt sometimes. It’s still a filibuster.”

But he had a bill that could not get out of the Senate, and surely, definitely, would not ever pass the House.

• • •

The president and Daley were on the patio outside Daley’s office with Plouffe, Geithner, Lew and Sperling when they got word that Biden was making progress with McConnell. It looked as if Republicans were ready to agree to a Defense/non-Defense sequester in the trigger.

Plouffe couldn’t believe it. These guys are so afraid of increasing revenues that they’re willing to put Defense on the chopping block? Republicans’ revenue phobia was so intense that they would sell out the Pentagon.

“This is a deal we can probably live with,” Obama said, willing to do almost anything to salvage something and prevent catastrophe.

Plouffe thought the president seemed genuinely surprised. Okay, Plouffe said to himself, maybe we’re going to avoid default.

• • •

At Treasury, Geithner was planning a press conference that afternoon that would outline the payments that would get priority if the U.S. government went into default. The bottom line was that some bills would not be paid. It was going to be alarming to the world, and the press conference could induce a panic all by itself. There was a big debate that included the White House as to whether Geithner should appear before the cameras or do it off-camera. He would be explaining technical issues, but the main message would be that the United States was about to go through a financial typhoon in which the treasury secretary did not have the means to limit the damage. It had the potential to be one of the more memorable moments in American history.

Geithner even considered preemptively leaking out the gruesome details to the media in hopes of pressuring the Republicans.

When it looked like McConnell was making headway, however, Geithner decided not to have the press conference. He was getting increasingly sick of what he called “the extortion game” the Republicans were playing. As the former New York Fed president and current treasury secretary, he had direct pipelines to Wall Street. The current masters of the universe there reported to him that Boehner was making calls to reassure the markets—and the Republicans’ growing campaign finance base—that everything was going to be fine.

“Boehner was calling New York,” Geithner reported to his senior staff. “They were calling all the guys in New York who were fucking tearing their hair out saying, ‘Don’t worry, it’s just a bunch of politics. We’re not going to take it to the edge, and we’re not going to default.’ ”

Geithner said he was trying to tell Boehner, “Don’t take it to the edge? We’re at the edge.” Even the perception that default was close could unleash the catastrophe.

Geithner considered himself a very calm person; he had been through lots of trauma and crisis. Despite the turmoil, he was able to sleep at night. He accepted, but hated, that politics was driving the crisis. He told his staff that in a recent meeting in the Oval Office, Boehner had told the president openly, “Most of my people don’t think
I can do this with you because it’ll be too good for you. You benefit more than we would.”

• • •

At 9 p.m. on Saturday night, Boehner’s staff got their first real look at the proposal negotiated by Biden and McConnell.

Loper had been in regular contact with Rohit Kumar about the progress of the negotiations, but now he had paper, so he drafted the Republican staff from the House Budget Committee and they pulled an all-nighter trying to understand the plan and to identify its shortcomings.

It was a challenge, because nobody in the office had operated under the Gramm-Rudman-Hollings rules, which dated back to the 1980s. Loper spent the night trying to get his arms around the proposal. What was exempt from cuts? What was the impact on Defense versus non-Defense spending?

At 11 p.m. they held a conference call with staff from Lew’s office to walk through the proposal and ask questions about how it would work.

But the basics were still the same as the Rubik’s cube that Boehner had negotiated a week earlier—$1.2 trillion in general caps, Reid’s supercommittee to find the other $1.2 trillion, and McConnell’s complex “disapproval” arrangement.

B
y about noon, Sunday, July 31, Biden and McConnell had reached a tentative agreement that the deal would not be linked to a vote on a balanced budget amendment to the Constitution. Many House Republicans still wanted the vote, but Biden pointed out it had no chance of passing the Senate.