By Sam Youngman and Mike Lillis - 06/02/11 09:27 PM EDT
President Obama told House Democrats on Thursday that they will have to join him in his efforts to cut the deficit, but he made it clear that Medicare will not be cut in any compromise.
After a meeting with Democrats that lasted more than an hour, the stalemate over raising the debt limit and cutting the deficit appeared to hold, with lawmakers emerging from the East Room of the White House calling for raising taxes and preserving Medicare.
House Minority Leader Nancy Pelosi (D-Calif.) said Obama made it clear that he needs Democrats to join him in "reducing the deficit while preserving Medicare," a clear stab at the deficit-reduction plan put forth by Rep. Paul Ryan (R-Wis.), which proposed major reforms of the entitlement program.
Pelosi insisted there be no cuts to Medicare benefits as part of the debt-ceiling deal, a Democratic aide said afterward.
"We want to do it in a way that preserves the principles of our caucus," said Assistant Leader James Clyburn (D-S.C.).
Behind Senate Minority Leader Mitch McConnell (Ky.), Republicans are insisting that Medicare cuts accompany any hike in the debt ceiling. But dabbling with Medicare would be a tricky business for Democrats, who have been newly energized about their electoral prospects since a surprise win in a special House election in New York last week, which many credit to voters' dislike of Ryan's plan.
Rep. Bill Pascrell (D-N.J.) said the Democrats' message was clear: "We will not take one back step on guaranteed benefits of the Medicare program," he said.
Obama's response, Pascrell added, left Medicare's staunchest advocates optimistic about the imminent deal. "We're pretty well-convinced the president will not, quote-unquote, throw us under the bus," he said.
Rep. Peter Welch (D-Vt.) delivered a similar message. While Obama "didn't rule out minor adjustments" to safety-net programs like Medicare and Social Security, Welch said, the president "was confident that we'd be successful in preserving the social safety net."
Obama was also clear that everything – including tax hikes and defense spending – is on the table as the negotiations progress.
Republicans, as they emerged from their meeting with the president on Wednesday, said that raising taxes is a nonstarter, but Rep. Chaka Fattah (D-Pa.) said that Obama "made it clear going forward that that is part of what he perceives as a balanced approach."
Fattah said Obama and Democrats believe that "we're going to have to have revenues raised."
"And that's where adults need to come to the table," Fattah said.
Newly sworn-in Rep. Kathy Hochul (D-N.Y.) – who was the first Democrat to address the president Thursday – noted that she was successful running on a platform that included revenue hikes.
"She reminded everyone that she ran in a very conservative district and it was an argument that revenues have to be part of the solution – and she succeeded," Welch said. "It's a real signal that everyday Americans – Republicans, Democrats [and] independents – appreciate that if we're going to solve this problem, everything does have to be on the table."
The leaders all expressed optimism, as the Republicans did on Wednesday, that a deal can be made and the debt limit will be raised. But Rep. Chris Van Hollen (Md.), the House Democrats' representative in the Biden talks, acknowledged that the two parties have not yet engaged on what he calls the "politically nuclear issues."
A White House official joined Democrats in calling the meeting "productive," adding that the president and House Democrats appear to be on the same page moving forward.
Although Obama was flanked by a number of advisers – including Treasury Secretary Timothy Geithner, White House Chief of Staff William Daly and Gene Sperling, an aide to Geithner – the president alone responded to the questions from members.
"One-on-one with any member who asked a question or made a comment, the president handled them all," Welch said.
Despite the high-stakes game both sides are playing over the debt ceiling, Pelosi and others said the main focus of the meeting was on creating jobs and reducing the deficit without cutting investments in programs that are critical to Democrats.
"That is a big concern in our caucus," said Rep. Dennis Kucinich (D-Ohio).
Thursday's meeting came amid a rash of bad news about the nation's economic recovery, including reports indicating that manufacturing and private-sector job creation both hit a skid in May following months of solid growth. Those indicators, combined with the continued decline in home prices, spell bad news for Obama, who's launching his reelection bid with national unemployment at 9 percent and voters wary of Washington's ability to compromise on solutions.
At the heart of the economic debate is a fundamental disagreement over the government's power to stimulate the economy following the worst downturn since the Great Depression. Republicans want a diminished role for Washington, arguing that federal deficits have hindered job creation in the private sector. GOP leaders are pushing to slash federal spending, cut taxes for businesses and individuals and scale back regulations they say have prevented businesses from hiring new workers.
Republicans have said that they will not approve a debt-ceiling hike, which the Treasury Department says is necessary, without a significant reduction in government spending. House Speaker John Boehner (R-Ohio) has called for "trillions" of dollars in long-term federal cuts to accompany a debt-ceiling hike.
Obama and the Democrats — who championed a $787 billion economic stimulus package in early 2009 — want to increase spending this year in areas like education, research and infrastructure. The GOP cuts, they warn, will only exacerbate the jobs crisis.
One Democrat on Thursday even called for a reprise of government stimulus.
"We need a stimulus," Rep. Norm Dicks (Wash.), senior Democrat on the House Appropriations Committee, said during a subcommittee hearing. "We need to put people back to work.”
Dicks conceded the importance of deficit-reduction measures to stabilize the economy over the long term, but warned that cutting too much too soon will cripple the recovery.
"We need to have restraint in spending once the economy is recovered, once we get people back to work,” he said.
The Democrats' call for increased spending is a risky one politically, as voters have grown wary of deficit spending that's crept well above $1 trillion annually in recent years.
Stirring up the debate, Moody's Investment Services, a credit rating agency, reported Thursday that it might apply a negative outlook to the United States' perfect triple-A rating if a "credible agreement on substantial deficit reduction" is not included as part of a deal to raise the debt limit.
Republicans were quick to pounce, with Boehner saying the report "reinforces the point Republicans have been making all year."
"An increase in the debt limit without major spending cuts will hurt our economy and destroy jobs," Boehner said in a statement.
The credit rating agency said in a statement that it was surprised by the level of political gamesmanship surrounding the debt-limit debate, which in turn has increased its skepticism about a deal being reached.
"Although Moody's fully expected political wrangling prior to an increase in the statutory debt limit, the degree of entrenchment into conflicting positions has exceeded expectations," the agency wrote.