Progress seen in debt talks, but outrage from Dems over lack of tax hikes

A White House gambit to clinch a grand bargain with House Republicans on the debt ceiling ran into trouble Thursday when Senate Democrats decried any attempt to forge a deal without guaranteed new tax revenues.

Reports of an impending deal, coming just 11 days before an Aug. 2 deadline to raise the $14.3 trillion federal debt limit, quickly consumed Capitol Hill and brought immediate denials from House Republicans and the White House. 

For the second straight day, President Obama called Democratic congressional leaders back to the White House for budget talks.

Two senior Democratic aides on Thursday said the White House had told Democratic leaders that Obama and Speaker John Boehner (R-Ohio) were moving closer to a deal that would include spending cuts and concrete entitlement reforms, but put off tax reform until next year. 

This would represent a major concession by the White House and Democrats to win GOP support for raising the debt ceiling, the aides said, since it would mean no concrete revenue increases would be part of the deficit-reduction package.

Within minutes of the first leak on the possible deal Thursday, a Boehner spokesman, Michael Steel, said there was “no deal” and “no progress to report.” Boehner later called into Rush Limbaugh’s radio show to insist to conservative listeners that he had not signed off on any agreement.

“No deal publicly, no deal privately, there is absolutely no deal,” the Speaker said.

At the White House, press secretary Jay Carney opened his daily briefing with a denial.

“There is no deal. We are not close to a deal,” Carney said. Hours later, communications director Dan Pfeiffer, in a Twitter post, specifically shot down reports that the deal would consist of $3 trillion in spending cuts without revenue increases.

“POTUS believes we need a balanced approach that includes revenues,” Pfeiffer wrote, referring to Obama.

Still, Senate Democrats were incensed at what they heard, underscoring the thorny politics Obama is facing as he seeks a comprehensive deficit deal that can pass muster with conservatives and liberals alike.

Senate Majority Leader Harry Reid (D-Nev.) confronted White House budget chief Jack Lew in a closed-door meeting of the Democratic conference; he afterward publicly dismissed a proposal that lacked new revenues.

Reid said there had to be fairness in a “potential agreement” under discussion, and that it could not just include spending cuts.

“What I have to say is this. The president always talked about balance. There has to be some fairness in this. This can’t all be cuts,” Reid said. “There has to be some revenues. The caucus agrees with that. I hope the president sticks with that, and I am confident he will.”

Sen. Barbara Mikulski (D-Md.) said many Democrats in the meeting with Lew were “volcanic” over the idea of a budget deal that would not include new revenues.

Asked if he thought a big deficit plan without revenues could pass the Senate, the chamber’s Budget Committee Chairman Kent Conrad (D-N.D.) replied: “Obviously I don’t.”

House Democratic leaders similarly denounced an agreement that did not include revenues. “I’ve said that we need revenues if we do a deal,” Rep. Steny Hoyer (Md.), the House Democratic whip, said as he slipped into the House chamber for a vote. 

The reported framework revisits an effort by Obama and Boehner to strike a $4 trillion deal that would combine spending cuts, entitlement reforms and more than $1 trillion in new revenues, with a broader tax overhaul to follow. That deal fell apart over Obama’s insistence on the revenues and conditions for tax reform — the suggestion that he had relented on those issues is what worried Democrats on Thursday.

At the center of the dispute is the question of whether the George W. Bush-era tax rates would be guaranteed to expire as part of the deal.

The rumors heightened an already tense, and sweltering, atmosphere around the Capitol as the Congress barreled toward the possibility of an unprecedented default by the U.S. government. Senior House Republicans professed to be out of the loop on the latest proposal, and Boehner was set to brief the GOP conference on the debt talks in a Friday morning meeting.

The pressure that Boehner faces from both sides was illustrated by a simple walk he took from his suite of offices to the House floor. As he strolled past a group of tourists, one shouted “We’re behind you!” while another chimed in: “Compromise! Compromise!”

While the House GOP steadfastly pushed its “cut, cap and balance” bill to raise the debt ceiling, Boehner told reporters Thursday morning he had prepared his conference for an eventual compromise.

The Speaker was asked to respond to comments from Rep. Jim Jordan (Ohio), chairman of the conservative Republican Study Committee, who described the “cut, cap and balance” plan as “the compromise” and signed a pledge opposing other alternatives to raising the $14.3 trillion debt ceiling.

“I’m sure that we’ve got some members who believe that, but I do not believe that’s anywhere close to a majority,” Boehner said.

Reid scheduled a Friday vote for the conservative legislation, which is expected to be defeated because of its deep cuts and its requirement that Congress approve a balanced-budget amendment to the Constitution before increasing the debt ceiling.

Separately, representatives of the S&P credit ratings agency briefed a group of House GOP freshmen on the consequences of a default and downgrade of U.S. debt. The meeting was organized by Rep. Nan Hayworth (R-N.Y.). 

The meeting drew more than 30 lawmakers, including some conservatives who are staunchly opposed to a compromise budget deal. One of the attendees, Rep. Joe Walsh (R-Ill.), has gained 86 co-signatories on a letter to the House leadership urging it to block a fallback plan floated by Senate GOP leader Mitch McConnell (Ky.) that would grant Obama more authority to raise the debt ceiling without spending cuts or congressional approval.

Members emerged from the S&P briefing convinced of the seriousness of avoiding a default, but said the ratings agency had reaffirmed their belief that the debt ceiling should not be raised without a credible plan — such as “cut, cap and balance” — to deal with the debt.

Some appeared to show increased openness to compromise on the debt ceiling.

Rep. Charlie Dent (R-Pa.) said he came away believing the caucus should be flexible in seeking a deal.

“Speaking for myself, we have to remain flexible … not make statements about what we will never do,” he said.

Rep. Charles Boustany Jr. (R-La.), however, said that he still believes that not raising the debt ceiling before Aug. 2 “won’t be catastrophic.”

Sam Youngman, Alexander Bolton and Mike Lillis contributed.