Obama: Government checks could stop on Aug. 2 without deal

The prospects for a deal to raise the $14.3 trillion debt limit took a sharp negative turn Tuesday as President Obama warned that Social Security checks might not be sent after Aug. 2 without congressional action.

“I cannot guarantee that those checks go out on Aug. 3 if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it,” Obama said in an interview broadcast Tuesday by CBS News, in one of his starkest warnings about the consequences of a default by the U.S. government.

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Obama appeared to be taking a page from the Clinton administration playbook. In 1996, Treasury Secretary Robert Rubin warned Congress he would not be able to send out Social Security checks the next month, and the House soon after voted to allow the government to issue more debt.

The comments came on a day of prevailing pessimism on Capitol Hill exactly three weeks before a Treasury-imposed deadline for raising the debt ceiling. 

Obama and congressional leaders met Tuesday at the White House, where they briefly discussed McConnell’s proposal. A Democrat familiar with the negotiations said the parties would meet at the White House again Wednesday afternoon.

The parties said they decided to put aside the “most contentious issues” from the past few days and focus on how they can use the Biden talks as a foundation for a deal, said the Democrat.

The difference in the discussion from Monday’s meeting, the source said, was that Monday was about House Majority Leader Eric “Cantor’s side,” and Tuesday was more of a give-and-take.

With no sign of a deal in the offing, Senate Republican Leader Mitch McConnell (Ky.) proposed a fallback plan that met immediate resistance from conservatives, and House Speaker John Boehner (R-Ohio) told his rank-and-file members that a far-reaching agreement he had discussed with Obama was “no longer operative.”

In an extensive closed-door briefing for his conference, Boehner sought to reassure Republicans that while he sought to broker a grand bargain with Obama, “at no time” did he agree to raise taxes. He pledged to fight for deep spending cuts and reforms in any deal to raise the debt limit, including a balanced-budget amendment favored by conservatives. The Speaker said, as he has in public, that the talks broke down over taxes and Obama’s insistence that an overhaul of the tax code increase the “progressivity” of the current system.

“Let me be crystal-clear on this: At no time, ever, during this discussion did I agree to let taxes go up,” Boehner said, according to prepared remarks provided by a source in the room. “I haven’t spent 20 years here fighting tax increases just to throw it all away in one moment. What I did do was lay out the conditions that would be necessary to make sure there would be no tax hikes. As the week went on, it became clear that the president wouldn’t accept those conditions.”

The Speaker said he walked away from the talks when it became clear that Obama would only agree to entitlement reform in exchange for “tax hikes.”

“Am I angry about it? I sure as hell am,” Boehner told Republicans. “I believe we are missing a great opportunity.”

Boehner addressed the GOP conference as Democrats mounted a coordinated effort to highlight the split between the Speaker and Cantor (R-Va.), who objected to the outlines of the agreement Boehner had discussed with Obama.

That led to a bitter exchange between Cantor’s office and Sen. Charles Schumer (N.Y.), the third-ranking Senate Democrat, who took to the floor to accuse Cantor of offering a Medicare plan during a Monday meeting at the White House that was “not fair” and “immoral.” Cantor spokesman Brad Dayspring shot back that Schumer’s claim was “a flat-out lie,” and said the majority leader was presenting proposals that both Obama and Biden had identified as areas of potential savings.

Boehner and Cantor presented a united front to their conference, and afterward the Speaker praised his second-in-command for doing a “good job” representing the House GOP over seven weeks in the Biden talks.

In the conference meeting, conservatives made a renewed push for the inclusion of a balanced-budget amendment in a debt deal, despite staunch opposition by Democratic leaders. “I would say to the president right now, we need to put back on the table some of the items that he took off early on,” Rep. Cathy McMorris Rodgers (Wash.), vice chairwoman of the GOP conference, told reporters after a closed-door meeting of House Republicans. “He took off the balanced-budget amendment early on. He took off changes to ObamaCare and repeal of ObamaCare. We believe that those are part of the solution and we want to put them back on the table.”

During the meeting, several members spoke up and pressed for the inclusion of the balanced-budget amendment, leading Boehner to mention the proposal in his public remarks for the second day in a row. 

“We have to have real controls in place to make sure this never happens again, real controls like a balanced-budget amendment,” Boehner told reporters. The Speaker had previously been cool to the idea because it requires passage by state legislatures and would take years to enact, unlike spending controls that could be authorized simply by a majority vote in Congress.

In a nod to conservatives, the House will vote on a balanced-budget amendment next week, though it might not earn the two-thirds support needed to pass. The proposal needs 48 Democrats to pass and is unlikely to win broad support because it includes provisions mandating a spending cap and a two-thirds vote for future tax increases.

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During the conference meeting, Boehner told members he supported the amendment and said “we’re going to fight for one.” 

Boehner’s hard line and the retrenchment of both Democrats and Republicans contributed to increasing doubts that the White House and congressional leaders could break their impasse over entitlement cuts and revenues. The tone marked a departure from a few weeks ago, when leaders on both sides spoke optimistically of striking a deal.

House Republicans lambasted the president for his warning on Social Security checks. 

“That’s fear-mongering; that’s not leadership; that’s sad and pathetic,” conservative Rep. Allen West (R-Fla.) told reporters. “There’s revenue that’s coming into this country the president needs to prioritize.”

Pressed by a reporter that the White House said it will not parse out the revenues, West responded, “Then they are liars.”

A House GOP leadership aide said there was no current path to the 218 required votes in the lower chamber for any of the three plans Obama has outlined to negotiators: a temporary increase in the debt limit, a longer increase with spending cuts identified by the Biden group or the grand bargain Obama and Boehner had discussed.

Lawmakers and aides said the mood on Capitol Hill differed strikingly from the atmosphere leading up to a potential government shutdown in the spring, when the parameters of a final agreement were more apparent. Several Republicans said lawmakers simply did not know what would happen as the calendar draws closer to Aug. 2.

“We really don’t,” Rep. Bobby Schilling (R-Ill.) said. He voiced confidence in Boehner and held out hope for a comprehensive agreement. “I say get the big deal out of the way.”

-- Molly K. Hooper, Sam Youngman and Erik Wasson contributed to this report.