Boehner Walks Out On Obama; "Grand Bargain" Collapses; Pared Down Approach Coming; Republicans Blew Opportunity for Game-Changing Legislation

So much for the Bloomberg assertion earlier today that Obama Aligns with Boehner seeking a debt deal.

Late this afternoon Boehner walked out on talks with the president, refusing to accept a plan Obama called a "Grand Bargain". The Speaker's server is flooded with requests for the Text of Boehner's Letter but here is a copy courtesy of the Washington Post.

Dear Colleague,

Our economy is not creating enough jobs, and the policies coming out of Washington are a big reason why. Because of Washington, we have a tax code that is stifling job creation. Because of Washington, we have a debt crisis that is sowing uncertainty and sapping the confidence of small businesses. Because of Washington, our children are financing a government spending binge that is jeopardizing their future.

Since the moment I became Speaker, I’ve urged President Obama to lock arms with me and seize this moment to do something significant to address these challenges. I’ve urged him to partner with congressional Republicans to do something dramatic to change the fiscal trajectory of our country . . . something that will boost confidence in our economy, renew a measure of faith in our institutions of government, and help small businesses get back to creating jobs.

The House this week passed such a plan . . . the Cut, Cap & Balance Act, which passed the House with bipartisan support.

Along with Majority Leader Cantor, I have also engaged the president in a dialogue in recent days. The purpose of this dialogue was to see if we could identify a path forward that would implement the principles of Cut, Cap, & Balance in a manner that could secure bipartisan support and be signed into law.

During these discussions — as in my earlier discussions — it became evident that the White House is simply not serious about ending the spending binge that is destroying jobs and endangering our children’s future.

A deal was never reached, and was never really close.

In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.

The president is emphatic that taxes have to be raised. As a former small businessman, I know tax increases destroy jobs.

The president is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won’t be there for their generation unless significant action is taken now.

For these reasons, I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward.

The Democratic leaders of the House and Senate have not been participants in the conversations I and Leader Cantor have had with the White House; nor have the Republican leaders of the Senate. But I believe there is a shared commitment on both sides of the aisle to producing legislation that will serve the best interests of our country in the days ahead — legislation that reflects the will of the American people, consistent with the principles of the Cut, Cap, & Balance Act that passed the House with bipartisan support this week.

I wanted to alert you to these developments as soon as possible. Further information will be coming as soon as it is available. It is an honor to serve with you. Together, we will do everything in our power to end the spending binge in Washington and help our economy get back to creating jobs.

Sincerely

John Boehner

Obama: 'I was willing to take a lot of heat'

Inquiring minds are watching President Obama's response to Boehner: 'I was willing to take a lot of heat'



Each Side Blames the Other

The Washington Post reports Obama-Boehner talks collapse; each side blames the other

Debt-reduction negotiations between President Obama and House Speaker John A. Boehner collapsed Friday, derailing an effort to reach a landmark agreement to cut spending, overhaul the tax code and avert a government default.

In subsequent statements, both sides blamed the other for an impasse that threatens to plunge the nation into a fiscal crisis if the government fails to meet a looming deadline to raise the federal debt ceiling.

“It’s hard to understand why Speaker Boehner would walk away from this kind of deal,” Obama said, but Boehner (R-Ohio) countered that it was the president who walked away from an agreement on revenue increases, demanding “more money at the last minute — and the only way to get that extra money was to raise taxes.”

Saying that “we have now run out of time,” Obama summoned Boehner, House Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) to the White House at 11 a.m. Saturday.

Obama told reporters at the White House Friday evening that he had offered Boehner more than $1 trillion in cuts to discretionary spending — both domestic and defense — and $650 billion in cuts to entitlement programs such as Medicare, Medicaid and Social Security. He said he had sought revenues that were less than those put forward in a bipartisan plan by the Senate’s “Gang of Six.” He said the $1.2 trillion in revenues could be accomplished without raising tax rates but by eliminating loopholes, tax breaks and deductions.

Now that he has “been left at the altar a couple of times,” Obama said, the question for the Republicans is, “Can they say yes to the anything?”

The Obama-Boehner plan was far more sweeping than the backup plan that Reid and Senate Minority Leader McConnell had been drafting, and its potential sweep frayed nerves among both liberals and conservatives.

Pared Down Approach Coming Up

The Wall Street Journal discusses a pared down approach in Grand Bargain Talks Collapse

The deal's demise, the latest twist in Washington's month-long search for an agreement to raise the debt ceiling, left House Republican leaders looking for a pared-down approach that would prevent the U.S. government defaulting on its obligations Aug. 2. Mr. Boehner said he would start negotiations with the Senate, which would continue through the weekend, with the goal of forging a new framework by Monday.

Exactly what a smaller deal might look like is unclear. A number of options have been discussed that would cut the deficit between $1 trillion and $2.5 trillion. Changes to big government programs and the tax code won't likely be tackled.

Liberal groups on Friday made phone calls to Mr. Obama's re-election campaign and Democratic congressional offices attacking reports of an Obama-Boehner grand bargain. Justin Ruben, executive director of MoveOn.org, said it would "betray the core Democratic commitment to the middle class."

Senior Republican aides said disagreements over taxes and changes to entitlement programs became too large to overcome.

One big hurdle that emerged Friday was the mechanism that would ensure Congress made good on its promise, something it hasn't reliably done in the past. Democrats want Bush-era tax cuts for the wealthy to expire if Congress doesn't act; Republicans want the so-called trigger to be elimination of the individual mandate in Mr. Obama's health-care law, people familiar with the matter said.

Rating Agency Response

The correct response from the rating agencies would be to downgrade US debt, not one notch but a handful of notches. Don't hold your breath on that. They will do one at most.

Republicans Blew Opportunity for Game-Changing Legislation

This was a dismal outcome, but hardly unexpected. Both sides are partially to blame but in my estimation Republicans blew it big time. They could have asked for anything in return for tax hikes.

Here are three rock solid ideas.

1. Scrap Davis-Bacon and all prevailing wage laws
   
2. End collective bargaining of public unions
3. Pass national right-to-work legislation

Sadly, none of those sorely-needed ideas even came up in the discussions. I do not know if Obama or the Democrats would have gone along with those, but after all the Obama talk "I was willing to take a lot of heat", Republicans blew a golden opportunity to pass some game-changing legislation in return for some pissy tax hikes.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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