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Can Obama, Congress Pull off a ‘Big Deal’ on Deficit Despite Political Perils?

July 7, 2011 at 12:00 AM EST
President Obama and congressional leaders met Thursday to discuss how to raise the nation's debt limit. Judy Woodruff discusses the meeting, which President Obama called "constructive," and the political pitfalls confronting lawmakers with Naftali Bendavid of The Wall Street Journal and Andy Kohut of the Pew Research Center.
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JUDY WOODRUFF: High-level Democrats and Republicans alike said today’s meeting at the White House marked the beginning of the endgame in reaching a final deal on deficit reduction.

The president and congressional leaders convened in the White House Cabinet Room, amid talk of a grand bargain involving Social Security, Medicare, and tax reform.

When it was over, Mr. Obama made an unscheduled appearance in the Briefing Room.

PRESIDENT BARACK OBAMA: I thought it was a very constructive meeting. People were frank. We discussed the various options available to us. Everybody reconfirmed the importance of completing our work and raising the debt limit ceiling so that the full faith and credit of the United States of America is not impaired.

JUDY WOODRUFF: The president said talks between leaders and staffers would continue in the coming days, with negotiators meeting again Sunday at the White House. But he acknowledged that hard bargaining lies ahead.

BARACK OBAMA: Nothing is agreed to until everything’s agreed to, and the parties are still far apart on a wide range of issues. And everybody acknowledged that there is going to be pain involved politically on all sides. But our biggest obligation is to make sure that we’re doing the right thing by the American people.

JUDY WOODRUFF: The president offered little in the way of specifics, but it was widely reported that he’s seeking up to $4 trillion in savings over 10 years, instead of $2.4 trillion.

The reductions would come from a combination of spending cuts; reforms in Medicare and Social Security, and upward of $1 trillion in new revenue from changes in the tax code. That squares with the Obama call last week that lawmakers do something big as part of a deal to increase the nation’s borrowing authority.

After meeting with House Republicans this morning in advance of the White House session, House Speaker John Boehner confirmed that reforming the tax code was on the table.

REP. JOHN BOEHNER, R-Ohio speaker of the House: We believe that comprehensive tax reform, both on the corporate side and personal side, would make America more competitive, help create jobs in our country, and it is something that is under discussion.

JUDY WOODRUFF: On the Senate side, Republican Mike Lee of Utah, a freshman elected with Tea Party backing, said the idea could draw his support.

SEN. MIKE LEE, R-Utah: I would have to see what they’re talking about. There’s a difference between revenue raisers and tax increases. There are ways of raising revenue without raising taxes. If it’s a tax increase, that’s something that Republicans in the House and in the Senate are not going to support.

JUDY WOODRUFF: But Senate Majority Leader Harry Reid insisted that Republicans must back off their anti-tax-hike stance if there’s to be any chance of a deal.

SEN. HARRY REID, D-Nev. majority leader: Democrats believe all Americans, including those who can afford private jets and yachts, should contribute to the collective effort to reduce the deficit. The question is why aren’t Republicans willing to do the same?

JUDY WOODRUFF: Other Democrats voiced concern about giving ground on Social Security and Medicare.

Arizona Congressman Raul Grijalva co-chairs the House Progressive Caucus.

REP. RAUL GRIJALVA, D-Ariz.: If Social Security, Medicare and Medicaid are on the table as part of the overall deal — and at least that’s the discussion and that’s what we have read — then we cannot support that deal. We understand it could be restructuring for Social Security or Medicare, but cuts to beneficiaries, cuts to benefits, raising retirement age, all of that is off the table.

JUDY WOODRUFF: Those positions will have to be reconciled if Congress is to craft the debt ceiling bargain that the president envisions before the Aug. 2 deadline. Otherwise, the government risks default on the nation’s financial obligations.

For more, we turn to Naftali Bendavid, congressional correspondent for The Wall Street Journal, and Andy Kohut, president of the Pew Research Center.

It’s good to you have both with us.

ANDREW KOHUT, Pew Research Center: Thanks.

JUDY WOODRUFF: Naftali, let’s start with you.

They are talking about a big deal, so what would that, could that entail?

NAFTALI BENDAVID, The Wall Street Journal: Well, it probably entails a lot of political peril for both sides, because it would entail adjustments to things like Social Security and Medicare, which Democrats are pretty much dead-set against, and it would have to include some kind of tax increases to reach the kind of $4 trillion figure they’re talking about.

It would also involve a tremendous number of cuts to spending across the board, including the military. So, I think what they are talking about, essentially, is holding hands and jumping off a cliff, something that would involve some pain for both sides.

JUDY WOODRUFF: So, when — but Republicans clearly are still not there when it comes to tax increases. We heard Sen. Mike Lee saying, well, it’s one thing to talk about revenue raisers, but we’re not going to talk about tax increases.

How do you read what Republicans are thinking and are prepared to do on taxes?

NAFTALI BENDAVID: Well, I think that they are prepared to increase taxes, but I think it has to be defined and described in a politically palatable way.

So, in other words, one person’s tax increase is somebody else’s ending wasteful subsidies. But it amounts to the same thing, in the sense that somebody’s taxes are going to go up. And what Republicans have said is they’re willing to accept the end of a lot of tax breaks, as long as overall tax rates go down. And I think that’s the kind of thing we’re talking about here.

JUDY WOODRUFF: And this idea that it has to be revenue-neutral, can revenue be raised? Is that something Republicans are prepared to vote for?

NAFTALI BENDAVID: Well, I think, in the end, they probably would be willing to accept an increase in revenue, as long as some tax rates went down at the same time.

But this is the sort of grand bargain that we’re talking about. Democrats are going to have to accept things that they have said they never would accept, like changes to Social Security. And Republicans are going to have to accept some tax increases.

Now, the question and what Republicans and Democrats are trying to figure out in the next couple of days is, can they pull that off?

JUDY WOODRUFF: The language — we described the language today as positive, for a change. Do you see it that way? I mean, is there some feeling in the air that they are headed for some kind of an agreement?

NAFTALI BENDAVID: I mean, I — absolutely. I think there is.

A couple days ago, I would have thought that maybe they are being so stubborn, that actually they will run into a wall. But at the meeting today, President Obama went around the table, you know, and he asked everybody, do you want to go for a small deal, a medium deal, or a large deal?

And by far, the majority of people on both sides of the aisle said they wanted to go for the biggest possible deal, this $4.5 trillion deficit reduction agreement. And, to me, that suggests that there is a certain amount of momentum behind some sort of deal.

JUDY WOODRUFF: Andy Kohut, you have been looking at what the American public thinks about the deficit, the debt. What do you find when you look at public opinion in terms of how they see the debt and what they think has caused the debt?

ANDREW KOHUT: Well, the debt and deficit, concern about it are at an all-time high.

Interestingly, we did a poll a few weeks ago which showed 60 percent saying that great contributions to this were the wars in Afghanistan and Iraq. Only 24 percent said increased domestic spending.

And while there is a lot of focus on domestic spending, if you talk to the ordinary person, it’s — that spending is seen as vulnerable if it involves waste, fraud and abuse, but when benefits or when the entitlements are considered, that’s not considered waste, fraud and abuse.

JUDY WOODRUFF: So, when you — when you ask them about the tradeoffs they’re prepared to accept in terms of, you know, how much of — how much cutting are you, as a citizen, prepared to see to deal with the debt, what do you find?

ANDREW KOHUT: Well, surprisingly, when you ask about what is more important, preserving benefits for Social Security and Medicare, by 2-1 — or reducing deficit or the debt — 2-1, people say, preserve — preserve our benefits.

There is very little give there. Now, Republicans are of the view — more of the view that reducing the — reducing the deficit should be given high priority. But even among Republicans, it’s really interesting. There is a big income divide. Affluent Republicans say it is more important to reduce the deficit, but poorer Republicans, middle-class and lower-middle-class Republicans say, no, no, protect our benefits.

JUDY WOODRUFF: And have — are these attitudes, Andy, that have changed over time, with all the attention that’s now being given to the size of the debt and the urgency of the problem?

ANDREW KOHUT: Well, a lot — people are willing to do a lot of things to reduce this deficit. Concern is at an all-time high.

But when it comes to entitlements, there’s no movement. It really is rock-solid when we see 2-1 margins.

JUDY WOODRUFF: And, again, entitlements meaning Social Security, Medicaid, and Medicare.

ANDREW KOHUT: And even Medicaid. Having states raise the — make it more — reduce eligibility for Medicaid, not 2-1, but a solid majority say, no, let’s not do that.

JUDY WOODRUFF: Naftali, with all the public opinion in mind, what sort of divide, or is there one, between the leadership in the Democratic and Republican parties and the rank and file?

NAFTALI BENDAVID: I actually think that is one of the most interesting dynamics that we’re seeing. President Obama and Speaker Boehner feel, I think, that it is in their interests to have a historic, grand deal that could burnish their legacy.

But the rank-and-file members, they have to run for reelection not too far from now. So any grand deal that includes benefit cuts to Social

Security and Medicare, that includes tax increases, they are much more resistant to. So, there’s a couple things that have to happen here.

Obama and Boehner have to agree on something, and then they also have to sell it to their members. And both of those things are equally important.

JUDY WOODRUFF: One of the — I guess one of the overriding sense, senses that one gets out of all this is that more of the debt reduction would come from cuts, from cuts in entitlement, than it would on the revenue side. Is that pretty much a given?

NAFTALI BENDAVID: That is pretty much a given. I think there is something about the way the political landscape has evolved, that people are willing to accept far more cuts, even Democrats, spending cuts, rather than tax increases.

I mean, tax increases have become such anathema, such political poison in the political dialogue, that I think people are talking about a 3-to-1 ratio or something approaching that.

ANDREW KOHUT: And that is completely opposite to public opinion.

When we say, if push comes to shove, if you have to do something, what would you rather see with respect to these entitlements, revenues increased, or taxes increased, or benefits cut? People say, raise taxes, raise costs, but don’t cut those benefits.

JUDY WOODRUFF: And you see that across the board?

ANDREW KOHUT: See that across the board.

JUDY WOODRUFF: Republican — what about Republican vs. Democrat?

ANDREW KOHUT: Well, there is a gap on this, but when you get such large 2-1 margins and you have this class division within the Republican Party, that is potentially big stuff come election time. There will be a huge cry and howl if benefits are seen to have been — to have been cut here.

JUDY WOODRUFF: And so I hear you saying some of the public reaction is going to depend on how this is packaged, how it is described to the American people, whatever — if they come up with an agreement.

ANDREW KOHUT: Right.

I mean, there is support for raising the contribution cap, of doing some things like that. But the notion that the retirement ages will be delayed or in some way people are going to have to pay a larger share of their Medicare costs out of their pocket, all of those things are very, very unpopular.

JUDY WOODRUFF: Finally, Naftali, what happens between now and Sunday?

NAFTALI BENDAVID: Well, between now and Sunday, the staffers on both sides are going to get together and talk and try to come out with some rough ideas for the members of Congress and the president to talk about on Sunday.

Sunday should really be kind of an incredible and very important meeting. They are going to start in the afternoon. It’s widely expected they will go for hours and hours into Sunday evening. And I think we will find out at that meeting whether a grand deal is really possible.

JUDY WOODRUFF: Well, we know what you are going to be doing this weekend.

NAFTALI BENDAVID: That’s right.

(LAUGHTER)

JUDY WOODRUFF: It won’t be relaxing.

Naftali Bendavid, Andy Kohut, we thank you both.

ANDREW KOHUT: You’re welcome.

NAFTALI BENDAVID: Thanks very much.