The Wall Street Journal takes you behind the scenes how the deal to avert the cliff fell apart. The will not be a quiet holiday season.
Behind Scenes, Boehner Failed to Sell Republicans on Taxes, While Obama’s Spending Plans Rankled
By PATRICK O’CONNOR and PETER NICHOLAS (WSJ)
WASHINGTON—Congressional leaders and President Barack Obama called Friday for a return to negotiations to avert the so-called fiscal cliff, a day after talks cratered in a very public fashion when Republicans abandoned House Speaker John Boehner’s backup plan.
In truth, talks to secure a big deficit-reduction deal had already broken down Monday afternoon in the office of Mr. Boehner (R., Ohio), a Wall Street Journal reconstruction shows. Mr. Boehner had been negotiating a deal with the White House to let tax rates rise for upper-income people.
Mr. Boehner, irritated with the White House, was finding it hard to keep his troops in line as details of his negotiations with Mr. Obama leaked out. In the speaker’s office just off the Capitol’s majestic rotunda that afternoon, he told his top lieutenants that he was already thinking about a pared-down backup plan. “In the absence of an agreement, ‘Plan B’ is the plan,” he told his deputies, according to a script he read them that afternoon.
Charles Dharapak/Associated Press
President Barack Obama, pictured, and Majority Leader Eric Cantor failed to see eye to eye on talks to resolve the looming fiscal deficit, which broke down this week amid growing acrimony on both sides
J. Scott Applewhite/Associated Press
House Majority Leader Eric Cantor
One by one, they came out in favor of Plan B and against the broader deal.
House Ways and Means Chairman Dave Camp (R., Mich.) said the new tax revenue the broader plan called for was too high. Then Budget Chairman Paul Ryan (R., Wis.), whom Mr. Boehner had spent weeks wooing, said he couldn’t sign on because it didn’t make structural changes in entitlements.
The speaker went ahead with Plan B, which collapsed Thursday night before he could even bring it to a vote, leaving talks at a perilous standstill just days before the year-end fiscal-cliff deadline. Even if an agreement can be reached by then, both sides expect it to be a small package doing little to tackle the long-term budget woes and deferring the battle until next year.
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A review of the negotiations, based on interviews with a dozen aides and lawmakers, suggests the problems lay in Mr. Boehner’s inability to coax his rank-and-file to support a deal that raises taxes on higher-income Americans. Another factor was what Republicans saw as President Obama’s unwillingness to bend when a deal was in sight, jamming the speaker with a deal his party couldn’t swallow.
The negotiations offer little evidence November’s election brought the president and House Republicans closer together. If anything, the talks poisoned an already distrustful relationship.
Mr. Boehner could soon face a decision whether to call for a vote on some sort of plan that could avert the cliff’s spending cuts and tax increases but might imperil his position if he had to rely on Democrats to pass it.
Mr. Obama repeatedly lost patience with the speaker as negotiations faltered. In an Oval Office meeting last week, he told Mr. Boehner that if the sides didn’t reach agreement, he would use his inaugural address and his State of the Union speech to tell the country the Republicans were at fault.
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At one point, according to notes taken by a participant, Mr. Boehner told the president, “I put $800 billion [in tax revenue] on the table. What do I get for that?”
“You get nothing,” the president said. “I get that for free.”
After the election, Boehner aides tried to shape the debate by offering early concessions, including that the GOP would agree to raise new tax revenue. A speech Mr. Boehner planned to give was rewritten 18 times and included input from top Republican leaders.
He and Mr. Obama didn’t sit down together for another 10 days. The session began genially. But tension quickly emerged over the president’s call to include increasing the U.S.‘s borrowing limit in any final package.
Responded Mr. Boehner: “I’ve found in my life that everything I’ve ever wanted has come with price.”
Mr. Obama told the speaker he wasn’t willing to play games with the debt ceiling.
Staffs got to work on the outline of a deal. In their first offer, Republicans wanted to essentially preserve Bush-era rates set to expire Dec. 31 while raising some new revenue through a tax overhaul in 2013. The White House made clear it wouldn’t agree to a plan that didn’t raise some tax rates immediately.
Brett Loper, the speaker’s top policy aide, prodded White House officials to look for tax revenue elsewhere. In phone calls and meetings, he steered them to tax shelters and suggested limiting deductions for tax-exempt municipal bonds.
National Economic Council Director Gene Sperling told Mr. Loper it was impossible to hit revenue targets without raising tax rates.
At one point, Mr. Loper said, “I’m asking you for help. Are you going to help me or not?”
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Shortly after, aides to Mr. Boehner suggested he call the president.
Mr. Obama insisted on raising tax rates for those with household income above $250,000. The House GOP wanted significant spending cuts and fundamental changes to Medicare and other entitlement programs in exchange for new tax revenue.
The president repeatedly reminded Mr. Boehner of the election results: “You’re asking me to accept Mitt Romney’s tax plan. Why would I do that?” At another point, the speaker noted his GOP majority would also return next year.
The White House’s first formal offer, presented Nov. 29 left Mr. Boehner incredulous. It included a request for $1.6 trillion in additional tax revenue over 10 years, a permanent increase in the debt ceiling and money for road projects and other year-end priorities. In return it offered spending cuts of $400 billion—25 cents for each dollar in new revenue.
Taking a drag on his cigarette, Mr. Boehner asked Treasury Secretary Timothy Geithner, who had presented the plan, a number of questions but didn’t fully engage him. Across the Capitol, Senate Minority Leader Mitch McConnell (R., Ky) said he laughed at the offer.
The same sticking points kept rearing up—the White House insisting on more tax revenue than Republicans could stomach, and the Republicans demanding deeper cuts than the White House would accept.
During one session in the Capitol with White House’s legislative liaison Rob Nabors, Mr. Loper from the Boehner camp asked, referring to a near-deal during last year’s debt-ceiling fight: “Can you get back into the zone of where you were in July 2011?”
“No,” Mr. Nabors replied. “We were probably overextended then, and there’s no way we would do it now.”
Mr. Nabors said if they couldn’t reach a deal, they should keep lines of communication alive. The typically serious Mr. Loper asked, “So, you’re breaking up with us?”
On Dec. 13, Mr. Boehner went to the White House at the president’s request, joking he was going to the woodshed.
The president told him he could choose one of two doors. The first represented a big deal. If Mr. Boehner chose it, the president said, the country and financial markets would cheer. Door No. 2 represented a spike in interest rates and a global recession.
Mr. Boehner said he wanted a deal along the lines of what the two men had negotiated in the summer of 2011 in a fight over raising the debt ceiling. “You missed your opportunity on that,” the president told him.
That night, the speaker and Majority Leader Eric Cantor (R., Va.) decided to make the biggest concession so far.
As the country the next day digested news of a brutal school shooting in Connecticut, Mr. Boehner called the president and for the first time offered to let tax rates rise—on income above $1 million. The president acknowledged the concession but said Mr. Boehner’s plan wasn’t raising enough revenue.
News broke the next night both about the concession and that the speaker was willing to extend the borrowing limit. On Sunday, the White House sent a plane to fly Mr. Boehner back to Washington for a morning appointment with the president on Monday, the day it now appears the deal fell apart.
In that session, the president held firm for $1.2 trillion in additional tax revenue, a second step down from his original offer. Mr. Boehner asked for another $100 billion in spending cuts but couldn’t get a commitment.
Finally, the speaker said, “Well, you and I can sit here and stare at each other,” or he could leave and they would talk later.
Back in the Capitol, Mr. Boehner told Mr. Cantor the president wasn’t moving. They agreed to call him. On the call, Mr. Boehner restated he needed $1 in spending cuts for every $1 in revenue raised. He dropped a prior demand to increase the Medicare eligibility age.
The president told Mr. Boehner that he was willing to make some concessions on taxes and spending, but cautioned that they needed to retain Democratic votes for the bill to pass.
The speaker raised the prospect of moving a backup bill. White House officials said Mr. Boehner didn’t reveal what Plan B comprised. Administration officials expected a few more days of back-and-forth, but the speaker thought the prospects were dim for a big deal.
Meeting with his leadership team in the afternoon, Mr. Boehner read from a script prepared by his staff, telling lawmakers he still wanted a big deal but the rank and file needed to know the plan by a 9 a.m. conference meeting the next morning, Tuesday. He encouraged his colleagues to accept the backup plan.
“I’m going to keep the proposal on the table,” he said of the broader deal. “As I told the president, I’m not making an ultimatum. The offer stays on the table, even if we move on Plan B.”
His lieutenants made clear they preferred Plan B to the one Mr. Boehner was trying to broker.
The speaker called the president with news the House would move ahead with the backup bill, which would preserve Bush-era rates for all income below $1 million. The president was incensed.
As the week progressed, support didn’t materialize, with some GOP members complaining that the bill raised taxes and others that it didn’t have enough spending cuts. Mr. Boehner pulled it Thursday night and read the Serenity Prayer to members, whom he then dismissed.
On Friday afternoon, the president spoke to both Mr. Boehner and Senate Democratic leader Harry Reid in a bid to resurrect a deal. Soon afterward he left the White House for his annual family vacation in Hawaii.