Obama and Leaders
Reach Debt Deal
Published: July 31, 2011 - New York Times
WASHINGTON — President Obama and Congressional leaders of both parties said
late Sunday that they had agreed to a framework for a budget deal that would cut
trillions of dollars in federal spending over the next decade and clear the way
for an increase in the governmentfs borrowing limit.
With the health of the fragile economy hanging in the balance and financial
markets watching closely, the leaders said they would present the compromise to
their caucuses on Monday morning in hopes of averting a default before a Tuesday
deadline.
President Obama spoke from the White House on Sunday night, telling reporters
that gthe leaders of both parties in both chambers have reached an agreement
that will reduce the deficit and avoid a default.h
Just before Mr. Obama spoke on television, the two Senate leaders, Harry
Reid and Mitch
McConnell, took the floor to endorse the pact as well.
gI am relieved to say that leaders from both parties have come together for
the sake of our economy to reach a historic, bipartisan compromise that ends
this dangerous standoff,h said Mr. Reid, the majority leader.
The agreement came after a day of wrangling over Pentagon cuts, and it still
must be sold to the Senate and the House, with the House providing a particular
challenge.
As conversations flowed between the White House and Capitol Hill, Mr. Reid
publicly embraced the compromise that would tie deep spending cuts to a debt
increase, though his plan to bring it to a vote as early as Sunday were put off,
as was a tentative meeting of Senate Democrats to review it.
According to Congressional and administration officials, the delay was
attributable to efforts by Speaker John A. Boehner, Republican of Ohio, to limit
immediate reductions in the Pentagon budget and better protect it from future
cuts in order to cement votes from defense hawks. He needs those votes to win
approval of the plan in the House.
While architects of the compromise stopped short of declaring they had a
final agreement, a framework had emerged calling for at least $2.5 trillion in
spending cuts over 10 years, a new Congressional committee to recommend a
deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt
ceiling.
The tense, last-minute negotiations were taking place against a backdrop of
uncertainty, with a looming threat of a costly downgrade of the nationfs credit
rating and with investors worried about the global economic impact of a possible
default. The political stakes were unusually high as well, with leaders in both
parties staking out positions that may well be central to their re-election
chances in 2012.
If the compromise were to be nailed down, attention would immediately turn to
selling it to the rank-and-file. The leadership was anticipating objections from
Republicans that the plan did not go far enough while Democrats were wary that
Medicare
spending would take a hit.
Despite the remaining political and procedural hurdles, the predominant mood
on Capitol Hill was one of cautious relief that the gears were turning to
produce legislation that would eliminate the threat of a potential government
default after Tuesday.
Referring to the tortuous negotiations, Senator Dianne Feinstein, Democrat of
California, said: gSausage making is not pretty. But the sausage we have, I
think, is a very different sausage from when we started.h
She noted that the proposed caps on federal spending, combined with creation
of a new evenly divided panel to cut the deficit further, could fundamentally
change federal finances.
But not everyone was pleased. gIt may be the best we can do,h said Senator
Jeff Sessions of Alabama, the senior Republican on the Budget Committee. gBut I
do not think itfs enough.h
With the talks appearing to make progress, the Senate blocked a Democratic
proposal for a debt limit increase on a vote 50-49, falling 10 votes short of
the 60 required to limit debate. But all attention was on the negotiations.
White House aides were in a flurry of meetings as they prepared for the
prospect of announcing a deal. After weeks of political theatrics and
Congressional votes that appeared to go nowhere, the mood at the White House on
Sunday afternoon was one of cautious optimism.
But Obama administration officials are also aware of the precarious risk the
president was running if he strikes a deal that Congressional Democrats find
hard to swallow. Mr. Obamafs top political aides, including Vice President
Joseph R. Biden and the senior White House adviser David Plouffe, were on the
phone Sunday afternoon with Democratic leaders, who gathered in the Capitol
Sunday afternoon to explore the outlook for the measure.
A major question mark remained the House of Representatives, where a vote on
the agreement could occur Monday and where Mr. Boehner has found it difficult to
corral the most conservative wing of the rank-and-file. While the bipartisan
deal would be expected to attract significant Democratic support, Mr. Boehner
must still persuade many of his members to get behind it and would be pushing
for at least half of the House Republicans to back it.
In an e-mail to Republican House members, Mr. Boehner noted that gdiscussions
are underway on legislation that will cut government spending more than it
increases the debt limit, and advance the cause of the balanced budget
amendment, without job-killing tax hikes.h
gThose talks are moving in the right direction, but serious issues remain,h
the speaker wrote.
Under the plan as described by officials briefed on its outline, the debt
limit would be increased by $900 billion in the first installment, subject to a
Congressional vote of disapproval that President Obama would be able to veto. To
prevent a default, $400 billion would be added immediately.
A second increase of $1.2 trillion to $1.5 trillion would be available
subject to a second vote of disapproval by Congress. At the same time, a new
joint Congressional committee would be created to find a like amount of cuts.
If the evenly divided committee failed to agree on a plan, Congress would
either have to approve a balanced budget agreement or accept an across-the-board
cut in spending in line with the committeefs goal, with 50 percent of the
savings coming from the Pentagon beginning in 2013. Medicare would also sustain
cuts, though the reductions would be capped.
The rationale for picking such favored programs as the Pentagon for
Republicans and Medicare for Democrats was to provide a strong incentive for the
new committee to avoid a deadlock and deliver a deficit reduction plan that
could clear Congress.
According to Democratic officials close to the talks, among the final
sticking points that were worked out were efforts to exempt the Medicaid
program from reductions under the automatic spending reductions and make certain
that the Medicare cuts hit health care providers, not beneficiaries.
Negotiators did agree that any deal would not include language that could
lead to a new formula for the annual cost-of-living adjustments for Social
Security beneficiaries that could save more than $100 billion in the first
10 years. While many economists have long said the existing formula overstates
inflation, many Democrats oppose any change that would reduce benefits from
current law.
Dropping the proposal from the White House-Congressional talks reflected in
part the influence of Representative Nancy Pelosi, the Democratic minority
leader, whose negotiating hand has been strengthened since she will have to
deliver a significant number of Democratic votes for House passage of any
solution given the likelihood that Mr. Boehner will face significant loss of
Republican votes.
Senators said they expected that the plan as it was being portrayed would
attract a bipartisan vote even though both Democrats and Republicans would have
reservations.
Senator Mike Johanns, Republican of Nebraska, said that from the terms of the
deal described to him, gI think I will be satisfied and supportive.h After years
of work, he noted, Congress has become gserious about cuts in spending.h
Robert Pear and Jackie Calmes contributed reporting.
This article has been revised to reflect the following
correction:
Correction: July 31, 2011
An earlier version of this story incorrectly stated when the automatic cuts
would occur if Congress does not approve a second round in a few months. They
would occur at the end of the year 2012, not 2011.