‘Stalemate’: Obama Pleads for Compromise while John Boehner Holds Firm on Spending Cuts

Jul 25, 2011 9:48pm

ABC News' Z. Byron Wolf (@zbyronwolf) reports:

With the U.S. government hurtling toward an Aug. 2 deadline to avoid default, President Obama and House Speaker John Boehner squared off on national television tonight, making their separate cases about how to go about deficit reduction and raise the debt ceiling.

The two issues are tied together in the current Washington debate, Republicans insisting that any increase in the nation’s credit limit be accompanied by equal spending cuts and Democrats seeking to increase revenue by raising taxes on the rich and thus reduce the amount of budget cuts needed to cut the deficit.

Obama, speaking first from the White House, described a “stalemate” between the two parties and encouraged citizens to call Congress and encourage lawmakers to work together.

“America, after all, has always been a grand experiment in compromise,” he said.

And to that end, he invoked presidents from Ronald Reagan and George H.W. Bush to Bill Clinton, all of whom raised the debt ceiling and tried to deal with deficit spending by working across party lines.

It is hard to see where the compromise will come. Obama argued forcefully against deficit reduction that relies solely on cuts to government spending.

Boehner used his rejoinder from Capitol Hill to argue against runaway government spending, which he said has been “business as usual” in Washington.

“I’ve got news for Washington -– those days are over,” Boehner said.

While Obama pointed to the tax cuts and wars begun under President George W. Bush that started a snowball of debt, Boehner pinned the blame squarely on Obama.

“Here's what we got for that spending binge: a massive health care bill that most Americans never asked for.  A 'stimulus' bill that was more effective in producing material for late-night comedians than it was in producing jobs.  And a national debt that has gotten so out of hand it has sparked a crisis without precedent in my lifetime or yours,” Boehner said.

He also said the president changed course late last week in negotiations — demanding $400 billion more in new tax increases for deficit reduction on top of the $800 billion that had already been agreed upon. That was a bridge too far for Boehner.

“I gave it my all,” the House speaker said, without referencing the details. “Unfortunately, the president would not take yes for an answer. Even when we thought we might be close on an agreement, the president’s demands changed.”

 

Arguing that increased tax measures favored by Democrats would clamp down on businesses and so “kill jobs,” Boehner instead argued for spending cuts.

“The solution to this crisis is not complicated: If you’re spending more money than you’re taking in, you need to spend less of it,” Boehner said.

But Obama said “a little debt is manageable,” although he admitted that the government debt is out of control. To that end, he said Democrats would agree to painful spending cuts and reforms to Medicare, Medicaid and Social Security. But he argued forcefully that deficit reduction should not be spending cuts alone and implied that it is Republicans who need to give in on demands.

In broad strokes he outlined the deal that he and Boehner were close to inking last week — nearly $4 trillion in deficit reduction over a decade with spending cuts, entitlement reform and some increased taxes.

“The only reason this balanced approach isn’t on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a cuts-only approach –- an approach that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all," Obama said. "And because nothing is asked of those at the top of the income scales, such an approach would close the deficit only with more severe cuts to programs we all care about -– cuts that place a greater burden on working families."

Obama said the economy cannot bear to have this debate again in six months and that is why he said he opposes a short-term debt ceiling increase backed by many Republicans. Obama wants to delay another argument on the debt ceiling until 2013, which is also after the next presidential election.

Americans, he said, are “fed up with a town where compromise has become a dirty word.” Seeking to contrast everyday Americans with corporate CEOs and jet owners who he said would face higher taxes under a more balanced approach, Obama pointed to people who are looking at Washington with anger.

“The work all day long, many of them scraping by, just to put food on the table. And when these Americans come home at night, bone-tired, and turn on the news, all they see is the same partisan three-ring circus here in Washington.  They see leaders who can’t seem to come together and do what it takes to make life just a little bit better for ordinary Americans.  They are offended by that.  And they should be.”

But his argument did not mention that the balanced approach was seemingly abandoned last week, when Boehner abandoned bipartisan talks with the White House. Fitful talks between the parties over the weekend yielded no breakthrough.

At this point, Republicans are pursuing a plan in the House and Democrats are pursuing their plan in the Senate.

Republicans are rallying around a proposal written by Boehner that would raise the debt ceiling, but only by about a $1 trillion. Obama has said he would veto such a plan. The debate has been difficult and all-consuming for Washington and there is concern that having it again in one year could hurt the economy. It would also instantly become a top issue in the presidential campaign. Democrats have insisted that any debt ceiling increase last until 2013.

Boehner’s framework would cut and cap discretionary spending to generate $1.2 trillion savings over 10 years and increase the debt limit by less than $1 trillion. The plan would also create a joint committee on deficit reduction to come up with a second wave of deficit reduction by the end of this year.

Read more about the Republican plan.

Following a meeting this afternoon with the House Republican Conference, Boehner told reporters that he discussed a two-step approach to cutting spending –- with discretionary spending caps now, and also the formation of a bipartisan, bicameral special committee with a mandate to identify additional deficit reductions by the end of the year.

“This legislation reflects a bipartisan negotiation over the weekend with our colleagues in the Senate and as a result of this bipartisan negotiation, I would call this plan less than perfect, but it does ensure that the spending cuts will be greater than the hike in the debt limit and secondly there are no tax increases that are part of this plan.”

Boehner said the legislation would also require the House and Senate to each have a vote on a balanced budget amendment after Oct. 1 and before a second package of deficit reduction is brought to the floor -– allowing for enough time for support to materialize around a balanced budget amendment.

“Time’s running short,” Boehner warned. “I’m urging my House colleagues to support it and I’m urging my Senate colleagues to support it as well, and I think it would be irresponsible for the president to veto such legislation, because it is a commonsense plan and would help us avoid default.”

Earlier today the White House made clear it will support the plan written by Democrat and Senate Majority Leader Harry Reid. His proposal to cut more than $2 trillion in spending, including money saved through the planned drawdown of the wars in Iraq and Afghanistan -– a move Republicans dismiss as not really cutting spending — although those savings are also featured in a GOP Budget draft that passed the House earlier this year.

Read more about the Senate Democrats’ plan.

Democrats have moved toward Reid’s plan even though it does not guarantee any of the sweeping entitlement and tax reform that the President long advocated. And Liberals are wary of the plan.

“While we applaud Majority Leader Reid for his commitment to protecting Social Security, Medicare and Medicaid — and his opposition to a short-term deal that could drive up mortgage and interest rates for the middle class — we strongly urge him and all Democrats to insist on a balanced approach that ends outrageous tax breaks and loopholes for big corporations and the rich. Unfortunately, this plan doesn't do that,” said Moveon.org Executive Director Justin Ruben in a statement.

Democratic Rep. Karen Bass, D-Calif., noted on ABC’s "Top Line" program that the Senate plan, which includes just spending cuts but no increase in tax revenues, is “going to be very, very hard for Democrats in the House,” to support.

As Republicans and Democrats continued to pursue separate solutions, the world's stock markets remained calm — if a bit depressed. Major exchanges all closed down slightly. The Dow was down by 0.7 percent, the S&P 500 by .56 percent.

Only gold and the Swiss franc strengthened. Gold closed up 0.86 percent. Futures for the precious metal earlier in the day hit a record of $1,624.30 an ounce. The Swiss franc gained against the dollar.
U.S. Treasuries showed surprising resiliency, with the yield on 10-year Treasuries rising to 3 percent. Some observers took that as a sign that fears of financial catastrophe had been exaggerated. Guy Lebas, a fixed income strategist at Janney Montgomery Scott in Philadelphia, told Bloomberg he'd expect to see a bigger move if something "truly catastrophic" was on the horizon.

Read more about the economic impact.

ABC News' Jonathan Karl, Jake Tapper, John Parkinson, Sunlen Miller, Sara Just, and Z. Byron Wolf contributed to this report.

You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus