There is not a final deal yet, but the White House and House Republicans were in serious discussions this evening on a debt ceiling deal that would include up to $3 trillion in federal spending cuts and a joint commitment to increase tax revenues through tax reform to take place over the next year.
The details are still being worked out and may change, but late Thursay the deal looked like this, according to an informed source:
- Up to $3 trillion in spending cuts over the next 10 years, including some cuts to entitlements, such as use of "chained CPI" to lower cost-of-living increases for Social Security and higher Medicare premiums for wealthier retirees.
- A commitment to do tax reform that would increase revenue by lowering rates and closing loopholes.
- If tax reform fails and does not generate more revenue, a mix of tax increases and spending cuts would go into effect. The idea is to force tax reform to happen by having negative consequences for inaction.
Some of the big issues left to tackle include the scope of the changes and how to enact mechanisms that ensure a deal is balanced. For instance, negotiators must determine how much to raise revenue through tax reform and how to make sure Congress follows through with entitlement cuts.
White House press secretary Jay Carney, House Speaker John Boehner, R-Ohio, and House Majority Leader Eric Cantor, R-Va., all went to great lengths Thursday to shoot down reports that negotiators were close to a sweeping deal to extend the debt ceiling.
Democrats on Capitol Hill were increasingly nervous that the president and House speaker would push a proposal that included deep spending cuts, but without any increased taxes to offset the effects those cuts would have on government programs.
“There is no deal. No deal publicly, no deal privately. There is absolutely no deal,” Boehner told radio host Rush Limbaugh.
“There is no deal. We are not close to a deal,” Carney definitively told reporters in Thursday’s daily press briefing.
But there is increasing resolve that something must be done before the Aug. 2 deadline, when the U.S. government, which runs a $4 billion daily deficit, will no longer be able to pay all of its bills.
“We're not going to default, Jake,” Carney told ABC News' Jake Tapper Thursday. “Congress will act and has said that it will act, and we remain confident that it will.”
Boehner told Limbaugh that he is actively pursuing “fallback plans.”
“We’ve talked about fallback options if, in fact, Cut Cap and Balance does go down. And I do think that it’s our obligation to have a fallback plan if it doesn’t work," Boehner said.
Work on those fallback plans continues behind closed doors. Democratic leaders from Capitol Hill were summoned back to the White House for a 5:30 p.m. meeting. The president has been meeting separately with Republicans and Democrats off and on for the past week. The last time he met with leaders from both parties at the same time was July 14.
President Obama has been working with congressional leaders on several options to avoid risk of defaulting on U.S. debts, including a bill that would raise the debt ceiling and reduce the deficit through the much-discussed “grand bargain” of roughly $4 trillion in spending cuts, entitlement reforms and cuts, and tax reform that would generate new revenue. It is the nature of that tax reform and the size of the revenue that seem to be major sticking points.
Senate Majority Leader Harry Reid, D-Nev., spoke to reporters after a contentious closed-door meeting between Senate Democrats and President Obama’s budget director, Jack Lew.
Two Democratic sources said Lew faced “some very angry Democrats” as reports of a potential deal between Obama and Boehner that would rely on spending cuts but not include any revenues to offset cuts to programs leaked throughout the Hill.
There was also emphasis on the deal that had been constructed by Senate leaders Mitch McConnell, R-Mo., and Reid – the least expansive but simplest option – which would achieve $2 trillion in deficit reduction and give President Obama authority to raise the debt ceiling and remove Congressional roadblocks, but also give Republicans ample opportunity to note their opposition when he did.
Democrats are adamant that a debt deal must offset spending cuts with tax measures.
“What I have to say is this: The president always talked about balance,” Reid said. “That there had to be some fairness in this. That this can't be all cuts. There has to be a balance. There has to be some revenue in the cuts. My caucus agrees with that. I hope the president sticks with that. I'm confident he will."
Most Republicans are just as clearly still united against any sort of tax hike.
“The reason we’ve got a debt crisis is that government spends every cent it gets - and then some,” said Senate Minority Leader McConnell on the Senate floor Thursday morning. … Sending Washington more money will not solve that problem, it will enable it.
In public, Republicans continue to focus their attention on the Cut, Cap and Balance Act, which would mandate steep spending cut in the short term and cap spending to 18 percent of the GDP going into the future. That star-crossed legislative proposal passed the House this week and is set for a vote Friday in the Senate, where Democrats, convinced it would gut entitlement programs like Medicare and Social Security, are sure to defeat it.
What is becoming clear is that any big solution to deal with the debt will likely not be completed and signed into law by Aug. 2. And so President Obama relented Wednesday on his pledge not to sign any short-term legislation, but said he would only do so to bridge the gap between arriving at a deal and getting it turned into legislation and passed through Congress.
Further on the margins of the debate appeared to be the Gang of Six, a bipartisan and unlikely group of senators that used the president’s deficit commission as a model to envision sweeping tax and entitlement reform. That group, despite its bipartisan nature, drew skepticism from Senate leaders because its proposal included revenue measures that would have a hard time passing the House.
One gang member, Sen. Mark Warner, D-Virginia, was clearly alarmed that no deal would be reached. "I'm going to support any deal that actually gets us to the debt ceiling, that's the most important thing," he said on a conference call with reporters. I'm going to vote for virgually anything that extends the debt ceiling."
There was one potentially significant development for Republicans Thursday when Grover Norquist, who administers an anti-tax pledge to lawmakers and has 41 Senate Republicans on the record pledging never to raise taxes, told the Washington Post that allowing Bush-era tax cuts to expire, thereby allowing some tax rates to go up, would not be counted as a violation of the pledge.
“It would be a very bad thing to do,” Norquist told the Post’s editorial board. "It would raise taxes from where they are today. Would it technically violate the pledge? No."
Norquist quickly clarified to reporters that he would not support any tax increase, but the fact that it would not violate a pledge, argued Democrats, could free up moderate Republicans to support a debt reduction plan that included some revenue raising measures. Democrats have argued that any plan should raise some revenue [taxes] in addition to cutting spending.
ABC’s Jake Tapper, Jonathan Karl, Z. Byron Wolf, Sunlen Miller, Mary Bruce and John Parkinson contributed to this report.