Boehner backing away from grand compromise on debt, tax reform

House Speaker John Boehner (R-Ohio) said Saturday night he backs a more modest deficit reduction package than President Obama has proposed, scuttling the possibility of a grand bargain that would include broad tax reform.

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Boehner said in a statement Saturday. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”

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The Speaker’s statement comes ahead of a critical Sunday meeting of congressional leaders at the White House, where officials hope to push closer to a deal to raise the debt limit by the Aug. 2 deadline set by the Treasury Department. Boehner spoke by phone with the president early Saturday evening and released his statement to give leaders time to prepare for the Sunday meeting, a GOP source said.

Boehner had initially backed an effort to pursue a comprehensive agreement said to include more than $4 trillion in budget savings over 10 to 12 years. His top lieutenant, Majority Leader Eric Cantor (R-Va.), had opposed the plan because, an aide said, it would include more than $1 trillion in tax increases that Republicans have ruled out.

The smaller deal that leaders will likely now pursue would reduce the deficit by about $2.5 trillion through spending cuts and limited additional revenues, officials said. It is based on the discussions led by Vice President Biden, which ended after Cantor walked over what he said was the continued insistence by Democrats on tax increases.

The White House released a statement Saturday night indicated Obama was not giving up on a large deal. “Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington," said the statement from communications director Dan Pfeiffer. "The president believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so tomorrow, he will make the case to congressional leaders that we must reject the politics of least resistance and take on this critical challenge.”

While Republicans have ruled out net tax increases, in recent days they have signaled they are open to closing loopholes in the tax code that do not increase rates on individuals or businesses.

Boehner’s statement appears to end what had been a secret effort between him and the White House in recent weeks to strike what one Republican familiar with the discussions described as “a landmark agreement between the president and congressional Republicans that included reforms to all three major entitlement spending programs, strict caps on future spending, and comprehensive tax reform with a broader base and lower rates.”

“Due to Democrats' insistence on tax increases, the Speaker is now skeptical that such an agreement can be reached,” the Republican said. “He now believes a smaller package, potentially one built on spending cuts identified through the Biden talks, may be the more likely vehicle for moving forward. Such a package would still have to meet the Speaker’s call for spending reforms and cuts greater than the amount of any increased debt authority being granted to the president in order to be passed by the House.”

The Republican source said the Boehner-Obama effort stalled over taxes. After Boehner pushed the president to pursue major entitlement changes in the debt deal, Obama insisted on additional revenues, which Democrats have demanded throughout the deficit discussions. The Speaker, according to the Republican source, said the new revenues must come from economic growth and broad-based tax reform, not straight tax increases. The Republican said the White House rejected a Boehner proposal offered on Friday for “the core elements of tax reform.”

“A gulf also remains between the Speaker and the White House on the issue of medium and long-term structural reforms,” the Republican said. “Consequently, the Speaker believes a package that is smaller but still consistent with the standards he has outlined may now be the most appropriate option.”

A White House official disputed the charge that President Obama was not willing to give ground on entitlement programs, saying that is "not true."

"[Boehner] couldn't do revenues from wealthiest Americans, he walked away over that," the official said. "They are telling people we couldn't do entitlements, not true."

Pfeiffer said Obama “believes that solving our fiscal problems is an economic imperative. But in order to do that, we cannot ask the middle-class and seniors to bear all the burden of higher costs and budget cuts. We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree."

Senate Majority Leader Harry Reid (D-Nev.) put the blame on Republicans in a series of Twitter messages posted by his spokesman, Adam Jentleson. "We asked Republicans to consider a balanced approach that would have required shared sacrifice, but they would not," Reid said. "We still need to avert the economic catastrophe that would occur if we let the U.S. fail to pay its bills for the first time in our history, and I am confident we will."

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Senate GOP Leader Mitch McConnell (Ky.) backed Boehner. "Like the Speaker, Sen. McConnell has consistently said that we should cut Washington spending without raising taxes on job creators, particularly in the middle of a jobs crisis," spokesman Don Stewart said. "And he remains concerned with the Democrats’ unwillingness to take steps to protect entitlement programs from bankruptcy, but hopes the president will be able to use Sunday night’s meeting to encourage them to take action on needed reforms."

House Minority Leader Nancy Pelosi (D-Calif.) issued a statement Saturday that did not criticize Boehner but noted the White House sought a "bipartisan, balanced approach" to deficit reduction. "Whatever our views," she said, "the August 2nd deadline is certain and we cannot walk away from our obligation to the American people."

The details of the late-stage debt talks underscore the tightrope Boehner is walking. While the Speaker reiterated on Friday that he has always wanted to purse “the big deal,” he is faced with a conference of Republicans who have pledged to oppose any net tax increases. And Cantor’s reluctance to join Boehner in the effort left him with little room to maneuver.

Cantor told The Hill on Friday he had trouble seeing how $1 trillion in new revenues envisioned by the Obama proposal would not be considered a tax hike.

A Cantor spokesman, Brad Dayspring, said on Saturday night: “As Eric has said for weeks, a tax increase cannot pass the House and it is the last thing Congress should be doing with so many people out of work. Eric has always believed the Biden group identified between 2 and 2.5 trillion in spending cuts that could represent the framework for an agreement.

Rep. Chris Van Hollen (Md.), a Democratic representative in the Biden talks, told The Hill earlier this week that despite Cantor’s repeated claims, the lawmakers in the Biden group had only coalesced around $1 trillion in savings when Cantor left.

On Saturday night Van Hollen criticized Boehner’s move.

"It's disappointing that the Republican fixation with protecting tax breaks for corporate special interests and the very wealthy prevented them from agreeing to a balanced and broad deficit reduction plan to help our economy and our country,” the Maryland Democrat said in a statement.

White House chief of staff Bill Daley is scheduled to appear Sunday morning on ABC’s “This Week,” and Treasury Secretary Tim Geithner will appear on two other programs.


This story was updated at 10:20 p.m.

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