No Grand Bargain: Boehner Walks Away From Big Deficit Deal

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After days of hype in Washington, House Speaker John Boehner threw cold water on the prospect of a grand bargain on deficit reduction Saturday night, effectively scaling back negotiations on a deal tied to the effort to raise the debt ceiling before an Aug. 2 deadline.

“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Boehner said in a statement. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”

The decision to seek a smaller, $2 trillion deal (door No. 2, as it turns out) came after an afternoon call between Boehner and Obama. Boehner suggested dealing with most revenue issues in a sweeping tax reform bill later in the year, a GOP leadership source said, but Democrats demanded that significant revenue increases be part of the debt ceiling deal — something Boehner felt couldn’t pass the House. Talks also broke down, the GOP source said, over cuts to entitlements — a measure House Democratic leaders have long said their members can’t swallow.

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Boehner’s office said the Speaker, who is at home in Ohio this weekend, wanted congressional leaders to know his position ahead of Sunday evening’s planned negotiations at the White House. White House Communications Director Dan Pfeiffer responded to Boehner’s announcement in a statement late Saturday:

“The President believes that solving our fiscal problems is an economic imperative.  But in order to do that, we cannot ask the middle-class and seniors to bear all the burden of higher costs and budget cuts.  We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree.

“Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington.  The President believes that now is the moment to rise above that cynicism and show the American people that we can still do big things.  And so tomorrow, he will make the case to congressional leaders that we must reject the politics of least resistance and take on this critical challenge.”

The grand bargain, which would have included cuts upwards of $4.5 trillion, had been billed as too big to fail — a package offering major prizes for both parties. “The bigger, the better,” one freshman GOP member told TIME on Friday. “The bigger it is the harder it is to let fail.”  GOP leaders had been hoping that the prospects of game-changing spending cuts coupled with a once-in-a lifetime tax reform deal — a second tranche that would have passed before the end of the year — would have convinced recalcitrant Republicans and Democrats to go along. But both sides have dug in their heels in recent days and partisan sparring continued in the wake of Boehner’s announcement.

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“I am disappointed that Republicans are unable to work with us to take a historic step forward that would have dramatically reduced our long-term deficit,” said Senate Majority Leader Harry Reid. “We asked Republicans to consider a balanced approach that would have required shared sacrifice, but they would not.”

“As Eric [Cantor] has said for weeks, the tax increases that the Democrats are insisting upon cannot pass the House and are the last thing Congress should do with so many people out of work,” said Brad Dayspring, a spokesman for House Majority Leader Cantor.

“It’s disappointing that the Republican fixation with protecting tax breaks for corporate special interests and the very wealthy prevented them from agreeing to a balanced and broad deficit reduction plan to help our economy and our country,” said Rep. Chris Van Hollen, the top Democrat on the Budget Committee.

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“Like the Speaker, Sen. McConnell has consistently said that we should cut Washington spending without raising taxes on job creators, particularly in the middle of a jobs crisis,” said McConnell spokesman Don Stewart in a statement. “And he remains concerned with the Democrats’ unwillingness to take steps to protect entitlement programs from bankruptcy, but hopes the President will be able to use Sunday night’s meeting to encourage them to take action on needed reforms.”

The details of a smaller deficit reduction deal have yet to be worked out, but the collapse of the grand bargain leaves President Obama in a more favorable political position. If both parties agree to cut $2 trillion from the budget with minor tax increases, he’ll notch a bipartisan accomplishment. But he can also say he tried something more ambitious in putting cuts to Social Security and Medicare on the table without facing the political fallout of actually slashing those programs. He went big and congressional Republicans — not to mention the noticeably silent 2012 Republican presidential candidates — didn’t. It will be Republicans who will have to justify bowing to the extreme wing of their party and walking away from a deal that included some ten times more spending cuts than revenue increases. Some things just aren’t too big to fail.

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