In Debt Limit Speech, Boehner Addresses Two Audiences

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John Boehner looked a little like a kid summoned to the principal’s office. Standing at the podium Monday night before a sea of business tycoons in New York City, Boehner was a tad shaky and plenty defiant, the reluctant bearer of a message he knew his corporate audience wasn’t going to like.

“I know there are many in this room who are uneasy with this debate,” Boehner said of House Republicans’ refusal to raise the federal debt limit without tying the vote to major spending cuts. “I understand your concerns. It’s true that allowing America to default would be irresponsible.  But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”

Wall Street wasn’t Boehner’s only audience Monday night. His trip to the heart of corporate America was the latest move for a Speaker torn between two leery constituencies: the financial bigwigs fretting that another game of fiscal chicken will roil markets and deal a “catastrophic” blow to the sputtering economy, and the GOP rank-and-file, who want their leader to leverage those fears to extract massive spending cuts. Boehner’s speech — heavy on small-government boilerplate, replete with references to his humble upbringing and private-sector experience, and pocked with a few verbal blemishes– was an effort to navigate between these competing interests. It might have allayed some fears on both sides, but it didn’t completely dispel them.

“Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase,” Boehner said, more to the budget-cutting contingent in his conference than anyone in the room. “And the cuts should be greater than the accompanying increase in the debt limit that the president is given.  We’re not talking about billions here. We should be talking about cuts of trillions if we’re serious.”

The use of “trillions” aimed to make an impact with a Tea Party wing who griped the $38 billion in spending cuts Boehner won as part of last month’s deal to sidestep a government shutdown were insufficient. Their clamoring grew louder when a subsequent CBO study found the actual tally for FY2011 was a mere $352 million reduction  in outlays. And it reached a new decibel level last week, when Boehner’s lieutenants, including Budget Chair Paul Ryan and Majority Leader Eric Cantor–who will visit the New York Stock Exchange Tuesday, in the next phase of the Republican charm offensive–seemed to concede, before negotiations even kicked off, that the GOP’s grand plans to overhaul Medicare would have to wait until after the 2012 elections.

As a result, Boehner, often cast as an old-style Washington deal-maker, has now emerged as the leadership’s reigning hard-liner. “I don’t want to allow this moment that we have in our history to pass without real action to solve our long-term economic problems,” Boehner said. Dismissing Democrats’ calls for spending-cut triggers, he said the corollaries to a debt-limit hike “should be actual cuts and program reforms, not broad deficit or debt targets that punt the questions to the future.  And with the exception of tax hikes–which in my opinion will destroy jobs–everything is on the table. And I mean everything. That includes honest conversations about how best to preserve Medicare.”

To outpace the rise in the federal borrowing limit the Treasury says is needed, Republicans and Democrats would have to agree to more than $2 trillion in spending cuts. That is not going to happen, and the audience knew it. “All these numbers seem draconian and politically impossible to me,” Pete Peterson, the private-equity kingpin and former Nixon Administration cabinet member, told Boehner mildly. “You’re right, they are draconian,” Boehner responded, before pivoting to speak to his members: “But we need to put ourselves on a path where we can balance the budget and pay off our debt.”

Though he laid down a familiar marker on taxes and floated a ballpark figure for spending cuts, Boehner didn’t really give Democrats a peek at his cards. He didn’t say where the cuts should come from, or what form they might take, or the minimum he’d accept in exchange for not risking a default on U.S. financial obligations. The speech–nonbinding and nonspecific–was an ante, not a final wager. What both Wall Street and Republican colleagues needed was assurance. Business owners wanted to know he won’t resort to the brinkmanship that marked the 2011 budget negotiations and drag out debt-limit negotiations to the “11th hour,” as one participant put it.  “Not increasing the debt ceiling would be irresponsible,” Boehner repeated. “I would just as soon cut this deal tomorrow.” But in the same answer, he reiterated that he didn’t want “the moment to pass.”

On Boehner’s right flank, the Republican Study Committee is readying a set of guidelines of their own. But realists in the conference know a deal will be struck. “Everyone realizes this has got to be done,” a House GOP aide, whose boss is a member of the RSC, told TIME last week. “The things we really want aren’t going to happen, at least right now. If all you ever do is pass things through the House, the status quo stays the same. Boehner’s shop has been pounding that into the rank and file.” Fifty-four Republicans bucked their leaders on last month’s continuing resolution to keep the government running. They could do so again. But a deal to increase the debt limit while cutting some federal spending should still pass comfortably.

Despite what the guy in the tricorn hat says, the threat of a Tea Party revolt against Boehner has been overstated. But there’s no question the Speaker has to heed his critics on the right. Which means that for all of Wall Street’s warnings, taking negotiations over the fate of the U.S. economy into the 11th hour may, once again, be the only strategy Boehner can afford.