President Looks for Broader Deal on Deficit Cuts

Published: July 6, 2011 - New York Times

WASHINGTON — Heading into a crucial negotiating session on a budget deal on Thursday, President Obama has raised his sights and wants to strike a far-reaching agreement on cutting the federal deficit as Speaker John A. Boehner has signaled new willingness to bargain on revenues.

Mr. Obama, who is to meet at the White House with the bipartisan leadership of Congress in an effort to work out an agreement to raise the federal debt limit, wants to move well beyond the $2 trillion in savings sought in earlier negotiations and seek perhaps twice as much over the next decade, Democratic officials briefed on the negotiations said Wednesday.

The president’s renewed efforts follow what knowledgeable officials said was an overture from Mr. Boehner, who met secretly with Mr. Obama last weekend, to consider as much as $1 trillion in unspecified new revenues as part of an overhaul of tax laws in exchange for an agreement that made substantial spending cuts, including in such social programs as Medicare and Medicaid and Social Security — programs that had been off the table.

The intensifying negotiations between the president and the speaker have Congressional Democrats growing anxious, worried they will be asked to accept a deal that is too heavily tilted toward Republican efforts and produces too little new revenue relative to the magnitude of the cuts.

Congressional Democrats said they were caught off guard by the weekend White House visit of Mr. Boehner — a meeting the administration still refused to acknowledge on Wednesday — and Senate Democrats raised concerns at a private party luncheon on Wednesday.

House Democrats have their own fears about the negotiations, which they expressed in an hourlong meeting Wednesday night with Treasury Secretary Timothy F. Geithner.

“Depending on what they decide to recommend, they may not have Democrats,” Senator Sheldon Whitehouse, a Rhode Island Democrat, said in an interview. “I think it is a risky thing for the White House to basically take the bet that we can be presented with something at the last minute and we will go for it.”

Officials said Mr. Boehner suggested that he was open to the possibility of $1 trillion or more in new revenue that would be generated by addressing tax issues already raised in the talks, like killing breaks for the oil and gas industry, eliminating ethanol subsidies and ending preferential treatment for corporate jets.

But those changes would fall far short of the revenue goal, and the source of the rest of the money would, under what they described as Mr. Boehner’s proposal, be decided by Congress through a review of tax law changes. One official said some revenue could be generated by allowing Bush-era tax cuts for affluent Americans to expire at the end of 2012, which would produce hundreds of billions of dollars, though those savings would be offset by the costs of retaining lower rates for those below the income threshold.

Aides to Mr. Boehner said that no tax increases were on the table and that he had not agreed to the expiration of any tax cuts.

One source familiar with the talks said the speaker had put forward options on how to proceed, including making a commitment to a tax code overhaul that would lower rates while closing loopholes, ending deductions and instituting other changes to generate substantial new revenue. Mr. Boehner has in the past pushed tax simplification as a way to help the economy.

Democrats were distrustful of Mr. Boehner’s idea, saying such an approach raises the prospect that future tax and revenue changes could be blocked by Republicans after Democrats had already agreed to the detailed cuts. They sought assurances that all the elements of any budget deal would be enacted simultaneously.

“We want as robust a deficit reduction deal as possible,” said David Krone, chief of staff to Senator Harry Reid of Nevada, the majority leader, who would serve as point man for moving any agreement through the Senate. “But it has to be balanced between spending and revenues, in terms of timing, specificity and dollars.”

Democrats are not just worried about the substantial policy issues at stake; they are also concerned about the political implications of any deal as they try to hold control of the Senate next year and win back the House.

To the degree that any deal wins bipartisan support on slowing the growth of Medicare, for example, it would deprive Democrats of what has been one of their most potent arguments heading into 2012: their assertion that Republicans would gut the traditional Medicare system and leave older Americans vulnerable to rapidly rising health care costs.

Faced with the prospect that the federal government would default on its credit obligations, Democrats might indeed be cajoled into backing an agreement they did not strongly support. But at the moment, there is substantial private and public grumbling about what looms ahead.

Senator Bernard Sanders, independent of Vermont, urged the president not to yield to Republican demands to reduce the deficit by cutting hundreds of billions of dollars from Medicare, Medicaid and other domestic spending. He said that “the president has got to demand that at least 50 percent of deficit reduction come from revenues,” including higher taxes on the wealthy and large corporations.

At the same time, Representative Eric Cantor, the Virginia Republican and majority leader, said Wednesday that he would not accept any net increase in federal revenues, and that any money raised from eliminating tax breaks or loopholes must be offset by cuts elsewhere in the tax code.

“If the president wants to talk loopholes, we’ll be glad to talk loopholes,” Mr. Cantor said. “We have said all along that preferences in the code are not something that helps economic growth over all. But, listen, we are not for any proposal that increases taxes. Any type of discussion should be coupled with offsetting tax cuts somewhere else.”

White House officials acknowledge the unrest among Democrats. But they argue that Democrats will be in stronger shape politically heading into November 2012 if they help enact a credible deficit reduction deal, allowing them to mount the argument that they protected Medicare from a much more drastic overhaul by Republicans.

In contrast, they say, failure to produce an agreement could bring unpredictable and unfavorable economic and political consequences.

The officials are convinced that a larger package — one that would demand deeper cuts and more taxes but put the nation on a sounder fiscal footing for a decade or longer — is more politically palatable than the $2 trillion-plus package that was being cobbled together in talks presided over by Vice President Joseph R. Biden Jr.

 And not all Democrats see the push for a major package as a negative.

“We don’t need a minideal,” Senator Richard J. Durbin of Illinois, the No. 2 Democrat, said Wednesday on the Senate floor. “We need something that speaks authoritatively to the world that the United States understands its deficit challenge and is prepared to make the hard choices to address it.”