TOPICS > Politics

White House, GOP Budget Deficit Talks Hit a Wall: Now What?

June 23, 2011 at 12:00 AM EDT
Budget deficit negotiations between Vice President Joe Biden and GOP lawmakers broke down Thursday after House Majority Leader Eric Cantor pulled out over the question of raising taxes. Judy Woodruff discusses the breakdown and what's ahead with The Washington Post's Lori Montgomery and The Wall Street Journal's Damian Paletta.

JUDY WOODRUFF: Now, the latest on budget deficit talks and the high stakes in play.

All week long, both parties have become more entrenched in their public positions. And, today, negotiations between Vice President Biden and lawmakers broke down after House Majority Leader Eric Cantor and Republican Sen. Jon Kyl pulled out over the question of raising taxes.

House Speaker John Boehner later told reporters he agreed that hiking taxes on anyone was a nonstarter.

REP. JOHN BOEHNER, R-Ohio speaker of the House: Listen, we have got to stop spending money that we don’t have. And since the beginning, the majority leader and myself, along with Sen. McConnell and Sen. Kyl, have been clear: Tax hikes are off the table.

JUDY WOODRUFF: Democrats shot back that the Republican move toward an impasse was irresponsible and could jeopardize the need to raise the national debt ceiling by Aug. 2.

Here’s Senate Majority Leader Harry Reid this afternoon.

SEN. HARRY REID, D-Nev. majority leader: I think that, you know, we have to act like adults here. We have to do something, as Sen. Durbin said, by Aug. 2. And we’re going to do something by Aug. 2. But the Republicans should stop playing chicken and pushing us too close to that line. It’s not going to be good for our country or the world.

JUDY WOODRUFF: Both Republicans and Democrats now say they expect President Obama himself to get more directly involved in talks with Boehner, Reid, and others.

Well, we look at all this with two reporters closely following the action at the White House and on Capitol Hill, Lori Montgomery of The Washington Post and Damian Paletta of The Wall Street Journal.

And we thank you two for being with us.

DAMIAN PALETTA, The Wall Street Journal: Thank you.

JUDY WOODRUFF: Damian, I’m going to start with you.

Did the White House see this coming? Did they know this was about to happen?

DAMIAN PALETTA: The White House knew that talks were starting to hit a wall this week. But they had planned as recently as last night to continue talks today and possibly even Friday.

So it really caught everyone by surprise when Congressman Cantor said this morning that he was done talking and that it was really up to the president and to the speaker of the House to get over the final — the finish line.

JUDY WOODRUFF: And we should say that, just within the last few minutes, Vice President Biden’s office has put out a statement about all this. Are we learning anything new from that?

DAMIAN PALETTA: Well, that’s right. And it’s really the first we have heard from the White House today.

The vice president said that he agrees there has to be, you know, top-level engagement now, but that the Republicans are going to have to agree to some sort of balanced approach that includes taxes. And they’re not talking about raising tax rates. They are talking, though, about taking way some tax breaks that they feel like will bring in more revenue and will help in these deficit talks.

They don’t think that the cuts — they think the cuts that the Republicans are talking about might disproportionately hurt the low-income, maybe the middle class. And they want some of the changes to be kind of spread around.

JUDY WOODRUFF: Lori Montgomery, how would you characterize the areas of sticking-point disagreement here?

LORI MONTGOMERY, The Washington Post: Well, I think there are a couple of areas.

I mean, one obviously is taxes. The Republicans have since the beginning said that they are not willing to do any kind of tax increases, whether it’s, you know, raising taxes on the wealthy, which is an idea that is coming out of House Democrats, or whether it’s closing some of these corporate loopholes, like, you know, preferential treatment of hedge fund managers, or, you know, preferential treatment for corporate owners of private jets.

But there’s apparently also an impasse over how to write the spending caps that they want to put on discretionary spending. Republicans would like to take all of those cuts out of domestic agencies. And the White House and Democrats are pushing hard for cuts to come from the Pentagon as well.

So there are really a couple of areas here where they have sort of hit a wall, and they need some guidance from party leaders.

JUDY WOODRUFF: So, But why — but we didn’t hear about that other part from the Republicans today.

LORI MONTGOMERY: No, we didn’t. It’s a difficult issue for them, because they have got — they have got a couple of groups of people in the House.

There’s the Tea Party faction that would have a hard time voting for a debt limit increase under any circumstances. And then there’s a large segment of their caucus that can’t vote to cut defense spending. So they’re caught between a rock and hard place trying to figure out how to put together the votes on this thing, you know, leaving aside the issue of whether or not you raise taxes. It’s a difficult math problem for them.

JUDY WOODRUFF: Damian, what sort of progress have they made? We’re hearing the number $2 trillion thrown around.


JUDY WOODRUFF: We used to think that was a lot of money, but, of course, some people are now saying that it needs to be $4 trillion that they close, the gap that they close.

DAMIAN PALETTA: Right. Well, they say that they have got — we hear ranges between $1 trillion to $2 trillion that they have already agreed to of spending cuts and budget changes that would reduce the deficit.

But a lot of the Democrats say they won’t agree to anything unless there is some sort of symbolic tax change on the table. And, you know, if they are going to agree to changes in Medicare, big entitlement programs that a lot of the country feels strongly about, then they want to see some kind of compromise from the other side.

So, $2 trillion does seem like a lot, but it’s really — in the scheme of things, it’s not enough to put a dent in the trajectory of the debt that is supposed to grow. A lot of the experts say we really needed to be talking about $4 trillion to $5 trillion in reduction to get things under control.

JUDY WOODRUFF: Does it sound to you — does it seem to you that Republicans feel they may have an upper hand here, to some extent, because they were the ones who pulled out and said we want the Democrats to move?

DAMIAN PALETTA: That’s kind of the sense we had today, was that Republicans were in the driver’s seat, that they felt like, you know, that they have put their proposal out there. They’re willing to — you know, they already have these agreements on certain cuts. And so the deal is there for the White House to take or not. And they said no tax increases.

Now, you know, we’re not that far away from that Aug. 2 date that folks have been talking about. And the idea was to have a deal brought to the White House to almost finish off by July 1, which is, you know, pretty much, they have to have everything done by next week. It doesn’t look like that’s going to be done, when real philosophical, theological questions like taxes are completely unresolved.

JUDY WOODRUFF: Lori Montgomery, you mentioned how tough it is to get the different factions in each party together on this. You were talking about the Republicans.

Is there a sense that there is give on both sides, that we’re just not — that isn’t above the surface at this point?

LORI MONTGOMERY: That’s really hard to see at this point.

I mean, the Senate Republicans in particular have been very clear that they feel like the give that they’re giving is the vote for the debt limit increase. Polls show that increasing the debt limit beyond $14.3 trillion is hugely unpopular.

Now, both parties have played a large role in running up this debt. But Republicans are sort of seeing this as Obama’s problem. And so the give that they are giving is: We will help you solve this problem, but we want to get something in return. And that something is massive spending cuts, not tax increases.

JUDY WOODRUFF: So, does that give — as I was just asking Damian, does that give Republicans, to some degree, the — the upper hand here?

LORI MONTGOMERY: Well, they certainly seem to think so.

But, at the same time, polls indicate that more people feel like, you know, if this fails, if things break down, it will be the fault of congressional Republicans, rather than President Obama. I mean, it’s true that raising the debt limit is hugely unpopular.

But polls indicate that people also think that rich people could pay more in taxes. So, you know, both parties are in a little bit of a box.

JUDY WOODRUFF: Damian, where do you — do you see any — any evidence of give on either side?

DAMIAN PALETTA: Well, it’s interesting.

So, they had a meeting on Capitol Hill yesterday, Vice President Biden and a lot of lawmakers. And it was a really, I hear, ugly meeting, one of the worst they have had so far in the process. And then, less than two hours later, you have the speaker of the House, John Boehner, rushing up to the White House to talk to the president.

So, there is an open line of communication. I think the gravity of the situation isn’t lost on anyone. They do want to talk through this. The question is, who is going to blink on some of these major issues that everyone in the country cares deeply about, whether it is taxes or entitlement programs? So…

JUDY WOODRUFF: Maybe that golf game made a difference…

DAMIAN PALETTA: That’s right.

JUDY WOODRUFF: … that they played together.


JUDY WOODRUFF: Lori, where does everything go from here? Are they — is there a plan for them to meet together again?

LORI MONTGOMERY: I think it’s very unclear.

I mean, we’re told — Republicans say that the lines of communication, as Damian pointed out, have already been opened between McConnell’s office, Boehner’s office, and the White House.

There is no meeting scheduled for tomorrow. They had been planning to talk next week. I think that’s all up in the air. And, as Boehner said today, it’s the president’s next move. They have sort of got to decide how and when and whether this rolls forward. But it — but it’s clear that everyone is still very much at the table and engaged.

JUDY WOODRUFF: And the Biden statement today, the vice president’s statement, makes it sounds like they’re waiting for the other side to move.

So, Alphonse, Gaston — we shall see.


DAMIAN PALETTA: A lot of folks might say we have seen this movie before, with the government shutdown that went down to the last second, and, finally, someone blinked.

The difference here is that there is a lot of concern that Wall Street might become really concerned that there is not going to be a deal, the stock market might plunge, and that will precipitate some sort of action.

JUDY WOODRUFF: It’s not as if nothing’s at stake.

DAMIAN PALETTA: That’s right.

LORI MONTGOMERY: Yes. Well, and compared with the C.R., we’re getting to the impasse sooner. So, maybe this is good news. We have still got a month.


JUDY WOODRUFF: That is one way to look at it.


JUDY WOODRUFF: Lori Montgomery, Damian Paletta, we thank you both.