Lori Montgomery: “The Next Fight Is Going to Be Far Uglier”
Lori Montgomery is a reporter at The Washington Post covering U.S. economic policy, the federal budget and efforts to tame the national debt. In this edited transcript of two interviews conducted on Nov. 8, 2012 and Jan. 9, 2013, she discusses the long path of gridlock, dashed hopes for a deal and how the debt and deficit showdown has hurt both sides. “Two years of fighting has not been good for anybody,” she tells FRONTLINE. “The next fight is going to be far uglier and far bloodier…”
At the dinner the night of [Barack Obama’s first inauguration], … [Rep.] Paul Ryan [R-Wis.] says there’s sort of “fundamental rot.” What is he talking about? …
He’s talking about the fact that the Republican Party has not really addressed the principles of Reagan, that it hasn’t really tried to restrain government.
They’ve just spent six years with the majority in Congress and the presidency, and what have they done? They’ve spent more money, created new entitlements. Spending skyrocketed under Bush, and his sense is we have to chart a new direction for the party.
Do they really feel like they’ve been laid waste to by the election of Obama? Are they devastated that night and in those early days of the Obama administration?
I think they are, because at that point they’ve lost the House; they’ve lost the presidency; they’re hitting rock bottom. So it’s time for a new vision, and this is where Paul begins to work on his “Roadmap for America’s Future,” and a future that some people believe is the thing that’s going to lift the Republican Party back into primacy. And we see that come out very soon afterward, Paul’s plan to radically shrink government and cut taxes.
Who is Paul Ryan, then at least?
Paul Ryan is sort of an earnest protégé of [Rep.] Jack Kemp [R-N.Y., vice presidential candidate on the Dole ticket in 1996]. He’s been around town forever. He came here almost immediately after college and worked in various think tanks and was very close to Kemp, who was sort of a champion of this “lift all boats” conservativism to cut taxes, grow the economy.
And Kemp actually told Paul to stay on that track. His advice for Ryan as a young man was stay with [the House] Ways and Means [Committee]; focus on growth; focus on the tax system.
But Paul decides that what the party really needs is a more global and encompassing vision for the future of the government, which is why he takes up the House Budget Committee and develops this plan that just radically shrinks government and addresses entitlements, which legitimately are the government’s biggest spending problem. And he recognizes at that moment that he is grasping at some of the most painful decisions that lawmakers can make.
Social Security and Medicare. His early Roadmap for America’s Future tackled both of them, and he was a proponent of privatization of Social Security.
At that point, he was not a leading light that he’s become, but he sees himself as the guy who has the vision to lead the party back to a governing philosophy.
… Let’s talk about [John] Boehner [R-Ohio].
Boehner’s a minority leader, so at that moment, he’s sort of in the wilderness, too. He’s been around forever. He seems himself as a dealmaker, but on the eve of Obama’s election, they’re kind of in the tank. He’s sort of irrelevant. …
Until he becomes speaker [of the House], everybody likes him, but he’s like this guy who’s always — you know, you can come to his office; he’s always having a glass of wine and having a cigarette — but at this moment, he has these ambitions for grandeur that are not clearly in the cards at that time because they’re in the minority. …
So for a couple of years, the way the story goes, [Rep. Kevin] McCarthy [R-Calif.], [House Majority Leader Eric] Cantor [R-Va.], others go out and look for, literally cast a whole new crowd that they could bring in?
… This is the “Young Guns.” They have a book; they have a website. They’re the new face of the Republican Party, and as McCarthy told me, Paul is the brains, McCarthy is the strategist, Cantor is the leader.
And this is how they viewed themselves, as the guys who were going to come together with this plan to remake the party. And Boehner is sort of on the outs of all this, although he ultimately benefited. …
They succeed. There’s an earthquake that happens in the summer of 2010. … What happened?
There are a number of things happening. The Tea Party, obviously, grew out of anxieties related to the economic meltdown and the idea that we might start bailing out homeowners. “I paid my mortgage. Why should you get a break from the government?”
So there’s this sort of ugly kind of backlash against the government that snowballs with the health care bill and the death panels and the town halls and Obamacare and socialism.
And these guys, … as they’re campaigning on this vision of limited government that they feel should replace this socialistic bent, they begin to use the debt limit even at that point as a moment when they can strike, when they’ll have the ability to pressure Obama to give into them. …
If I ask you to characterize that [Republican] freshman class, the 87 or whatever they were coming in, how would you characterize them?
They were a group of people … that typically did not have a lot of experience in government. Typically some business owners. I’m thinking particularly about a guy, Mike Kelly from Pennsylvania, for example, a car dealership, had served on the local city council.
And they viewed themselves as having been sent here to stop all this crazy government stuff, you know. “We need to run government like a business. We need to stop the overspending” — as if you could just do that; as if you could stop paying for the wars in Afghanistan and Iraq; as if you could stop the spending on a dime and just turn things around.
Even conservative analysts in the think tanks were alarmed by this group of people, because they came in saying they wanted to cut spending to a certain level. And I recall talking with one budget expert at one of the conservative think tanks, and he’s like: “All they knew was they wanted to hit a certain number. When you tried to walk them through what that would mean, what programs are growing, the numbers within that number, they weren’t really interested in any of that. They just knew they wanted to cut spending.”
So there was a sort of willful, “Don’t confuse us with all this complicated government mumbo jumbo; we just want to get the job done.” And the debt ceiling was like that, too. All they knew was, “We aren’t going to extend the government’s credit card.” …
Do you figure Obama or the White House knew … about that potential kind of witch’s brew of people? …
They did, and I think that what they didn’t know is whether or not Boehner and his leadership team could control them. … The Republican leadership kept saying things like, “You don’t know how crazy these guys are,” and the White House guys literally didn’t know if this was a bargaining ploy, if it was sort of a bluff or if it was true.
Ultimately I think they came to believe that it was true, that they really didn’t have the ability to control this group of guys or lead them anywhere.
In fact, it seems there’s a couple of things that happen in the spring where Boehner can’t deliver on something, they think they’ve got a deal with him on. …
I think the initial CR [continuing resolution] to extend the budget, because they had campaigned on a promise to I think cut $100 billion out of the budget. And then they came in, and it was really sort of Paul Ryan’s first experience trying to lead these guys. It was like: “Well, OK, we said we would cut $100 billion, but it’s now January, so the year has already started. We can’t cut $100 billion; it’s $60 billion. But it’s not $60 billion, because we can’t cut the whole budget.”
It wound up being $30 billion, and Ryan is very earnestly trying to explain to these guys why $30 billion really is the same as $100 billion, and they were just having none of this. “What are you saying? We can’t plan on cutting $100 billion? We want to cut $100 billion.”
And so Boehner had trouble rallying these guys, just explaining sort of the most basic principles of budgeting and getting them to follow him. …
Any sense of Cantor in all of that? …
… Cantor and Boehner were working together on some of these issues, but then, when it came to the question of what kind of deal can we do with the president, Boehner was always more optimistic about his ability to do a deal and sell it than Cantor was. …
Sell it to their own people, to their own caucus, to the freshmen?
What’s that about?
I think they’re sort of riding a wild stallion in some ways. The party has gotten off into this anti-government foment, so wouldn’t you expect their elected representatives, once they get here, to have a hard time governing? I think that’s what has happened.
Boehner wants to govern like an old-school speaker. He wants to do the deals and he wants to be able to deliver. But they, for whatever reason, have not figured out a way to convince these guys that government is the art of compromise. They simply do not believe that.
… Ryan was on the Bowles-Simpson commission [National Commission on Fiscal Responsibility and Reform, commonly referred to by the names of the two chairs of the commission], which in December of 2010 came out with this plan that is still considered the best bipartisan proposal for dealing with these problems. Ryan voted against it, as did the other two House Republicans, they said because it didn’t deal with health care.
So then Ryan comes out with his budget, which is the same very extreme, small-government, cut-taxes vision that he’s laid out in the past. And so he and Dave Camp [R-Mich.], the chairman of the House Ways and Means Committee, get an invitation from the White House to come hear the president lay out his plan. …
So they go to George Washington University. They’re seated in the front row, and Obama — with the lights in his eyes, they say, unable to see who’s directly in front of him — just launches into a blistering condemnation of the Republican budget, and how this is a very small and painful vision of a country shrinking and pulling away from itself. And it’s just like, you know, Paul is the worst person in the world and cruel and —
So Ryan gets up from this and is just shocked, and he feels like he’s been slapped in the face, and he immediately goes on TV and starts talking about how the president has poisoned the well for a deal. Before he gets out of the room, Gene Sperling, the National Economic [Council] director, goes running after him saying, “Paul, he didn’t know you were here; we didn’t mean it this way.”
[Former Clinton White House Chief of Staff] Erskine Bowles called him; Erskine and [former Sen.] Alan Simpson [R-Wyo,] were there, too. They were appalled, and it just was this moment where I think that the White House, they say unknowingly, really did in fact cause Ryan to assume that they were not negotiating in good faith.
And he at that point — so he says — believed that there was never a deal to be done with this president, because this president only wanted to make them look bad and was only running for re-election and was not interested in negotiations.
From the White House point of view, this was all an accident. They had invited all the members of the Bowles-Simpson commission, but it was a clerk who did it, you know, and from the Republicans’ position, they’re like: “He just publicly humiliated us. How can we trust him?”
Where are you on that?
I think that it is entirely possible that the White House screwed up. On the other hand, you sort of wonder why Ryan took it so hard. It seems like a little thin skin there. …
… The net effect?
The net effect was that I think Paul thereafter was always on the side of “You can’t trust them.” And they sort of needed him to lead the freshmen, because the freshmen trusted Paul. So in the end, he sold the debt deal. He did help to rally votes for the deal that was cut, but he was never an advocate of this Grand Bargain that Boehner was trying to put together. …
So the lines are pretty clearly drawn. … It’s the spring, and [Secretary of the Treasury Timothy] Geithner is warning the president: “You’d better do something about all of this, because bad things will follow on. It’s time to take this very seriously.” … He sends [Vice President Joe] Biden into a series of negotiations with others, including Eric Cantor. The result of those negotiations is what?
The result of those negotiations is mixed. They do identify a list of things that everybody agrees they could cut, things like [agricultural] subsidies. They agree they could cut federal worker pensions. They agree that maybe they could take a whack at some of the veterans’ benefits. They’re not small things; they’re big things.
But the Democrats felt that they made a terrible mistake in those talks, because they were willing to discuss these sorts of budget cuts before they got to what the Republicans were willing to do on taxes. And so they would reach agreement on these series of cuts, which are still sort of out there and available into any deal, but they never got any kind of agreement from Republicans on revenues.
Even the easy stuff like taking away tax breaks for corporate jets or tax for oil and gas companies, even that kind of stuff that could be sold politically, Republicans were never willing to talk about it. So Democrats are getting more and more frustrated by the sense that they’re giving and giving and giving, and Republicans are still saying, “Oh, no, we can’t talk about taxes yet.”
When Cantor, who doesn’t want to be in these talks to begin with because he knows that it’s a dangerous place to be, learns that Obama is meeting secretly with Boehner, he sort of throws up his hands and says, “I’m pulling out.”
Why is it a dangerous place to be for Eric Cantor?
Because Eric Cantor, like I said, is leading from behind. He’s chosen to reflect what he believes is possible in his caucus rather than dictate to his caucus what should happen.
… Either way, it’s a losing proposition for Eric Cantor, because either he’s going to fail or he’s going to come out with a deal that raises taxes. So he’s extraordinarily uncomfortable in these talks.
It’s like painting a bull’s-eye on him in front of his freshmen, right?
Exactly. And people say he was perfectly cordial and very nice and at times even sort of constructive in these talks, but everyone knows that Boehner has shoved him into a really tight spot.
And so when he finds out that the president is talking to Boehner, he’s like: “You know what? We are kicking this upstairs. I am not making these decisions.” So he pulls out, and the talks collapse.
… There’s something that appears in The Wall Street Journal. … It’s an editorial that basically says: “No, no, no. No revenue talks, no.”
… An editorial appears in The Wall Street Journal that says, “John Boehner, don’t talk about revenues.” And the suspicion has long been that Paul Ryan, who talks regularly to the Journal editorial board, or perhaps Cantor, suggested nicely that maybe they might want to slow this whole thing down.
So the editorial comes out, and on a Saturday that was otherwise sort of status quo, … we get a statement from Boehner: “I’m pulling out. The talks are over.”
Boehner says that he was just trying to shake things up, because things were not going necessarily the way he wanted; the White House was not coming along as quickly as he wanted them to. But in any case, he was right back at it within two weeks, with Cantor at his side. …
… What’s your understanding of what happened between Obama and Boehner at that first golf [game]?
My understanding is pretty much what’s been in the paper, which is they said, “I want to do a big deal, do you? Let’s work together,” and sort of agreed that they both wanted to do something great.
We know that Obama has an instinct, a burning desire to do legacy-like things, health care as the primary example. Did Boehner have such an instinct, too? …
He’s always said that he wanted to be House speaker because he wanted to do big things. He’s said that repeatedly. And that’s what makes the guys in the Republican leadership nervous about him, because they think he’s too interested in solving the country’s problems, which could be bad for them, I guess. …
And the relationship between Boehner and Obama, how do you think that probably works?
They have a good relationship. I think Obama sees him as a little less sort of sophisticated and cagey. I think he sees him as sort of an old-style pol with his merlot and his cigarettes. You know, he could almost be the kind of guy that Obama worked with back in Springfield, sitting around the bar outside the state Capitol.
But the big problem with Boehner, I think, is the Democrats have come to see him as just kind of feckless. He wants to do the right thing, but they can’t count on him to deliver.
How about Obama and Cantor? …
They don’t know what to make of Cantor because he is so, you know, finger in the wind. Obviously they’ve had some very sharp moments face to face. In those Biden talks, or I guess before the Biden talks began, Obama dressed Cantor down at one point, saying, “Don’t call my bluff on this, Eric.”
I don’t think that I’m speaking out of school to say they don’t really have a lot of respect for him, because they see him as somebody who has the capacity to lead but isn’t.
So it breaks down in [July]. … Two days later, Boehner has Geithner and [then-Chief of Staff Bill] Daley down, and basically what does he say to Daley and Geithner?
He says he wants to talk again, that he’s now got Eric Cantor by his side, which the White House took as a very good sign. And they laid out a two-page offer that included entitlement cuts; it included discretionary cuts, and it included a framework for tax reform that would raise $800 billion over the decade, which was the equivalent of what Obama was asking for in raising taxes on the wealthy.
So this was pretty good development: the $800 billion on the table, Eric Cantor in the room. The White House thinks, “We can work with this.”
Geithner and Daley come back, and they meet with the president, and they say?
They say: “We think you should talk to them. There’s something real here.” A secret meeting is arranged at the White House. …
What happens at the meeting?
Cantor and Boehner show up, and they’re talking with all the staff around, the liaisons to the Hill. Geithner’s there, Sperling’s there, [then-Office of Management and Budget Director] Jack Lew is there, and suddenly the president, fresh home from church, pokes his head in the room and says, “I want to talk to you guys,” and they disappear into the Oval Office for about 20 minutes.
Who’s in there?
Obama, Boehner and Cantor, alone. We don’t know exactly what happened, but the Republicans emerged from that meeting thinking they had a deal. It’s not clear that there was a handshake; it’s not clear that there was any kind of verbal conclusion, but when the president came out he said, “I want this one,” and everybody scurried to move into action.
It’s a big deal.
It was a big deal. And the Republicans felt like they were very close as well. And the thing that happened at that meeting that made them think that this was possible was they said: “We have to have this money. This $800 billion has to come through tax reform, and we’re going to need your help on making it look like it’s through economic growth. We’re not raising taxes; we’re growing the economy, and that’s going to generate revenue.”
Because otherwise they can’t make the freshman vote?
Otherwise they can’t sell it. But Geithner says something that day to make them believe that the White House is going to deal with them on that issue. And this is a big deal, because Democrats have long said: “Tax cuts don’t pay for themselves. It’s crazy. We have to raise taxes to get more revenue. We can’t cut taxes to make the economy grow. That’s just silly.”
But Geithner that day says something that makes them believe that the White House will work with them to at least sell it that way, fuzzy it up a little bit so it’s not clear how they’re raising the money.
And they feel so good about this that they go back to the Capitol, and Boehner and Cantor meet with their staffs — their top staffs are in the room — and they send another piece of paper back to the White House that not only says, “Yeah, we’re ready to do this,” but they drop kind of a significant demand, which is the demand that investment income, capital gains and dividends, be taxed at a lower rate.
So they’re saying, “As we approach tax reform, you guys have just agreed to let the top rate come below 35 percent, which is great for us, so we’re going to drop the demand that investment income be taxed at a lower rate,” which is really a big deal. That’s the fundamental pillar of conservative ideology, so they’re clearly coming closer together. And then it fell apart.
This is on a Sunday night, so everybody goes to bed Sunday night thinking they’ve got a deal.
Feeling pretty good. …
Dawn over the Capitol. What happens the next [day]?
Nothing. Radio silence from the White House. And the day passes, and Boehner’s guys are sitting there sort of drumming their fingers waiting for a response. Hours go by; they get a couple of emails I think from the White House, or maybe a phone call saying, “It’s coming, it’s coming.”
Night falls, still no response. And they get a message from [Deputy Chief of Staff Rob] Nabors saying: “It’s not going to be tonight. We’ll have to get back to you tomorrow.”
What is going on at the White House during Monday?
It’s sort of unclear what’s going on at the White House during Monday. They say that they want to make sure this is locked down tight; they’re crossing t’s and dotting i’s.
But they also know that this group of senators has been meeting in a bipartisan way to try to come up with a deficit reduction plan that may be more favorable than the terms that they’ve just negotiated with Boehner.
So what’s really not clear about that day is if they are encouraging, trying to speed up that other process to see what comes out of it, or if in fact they are just reviewing this deal and trying to figure out whether they’re comfortable with it, which is what they say.
It’s got some tough stuff for them in it. It’s got stuff like raising the eligibility age for Medicare, which Democrats really hate, from 65 to 67; would increase co-payments for Medicare recipients. And the thing that Senate Democrats really hate: It would change the measure of inflation for Social Security, so Social Security checks would increase at a much slower rate, which the interest groups see as a clear cut to current benefits. And that’s something that Democrats have said they would not do in any deal.
So it’s possible that they’re sitting there gulping and trying to figure out, “Do we really want to do this?” But at the same time, they also know that this other group is about to report. And what in fact happens is there is no further communication from the White House until that other group does in fact report on Tuesday morning.
And this other group, talk about a kind of cockamamie — it’s like a weird curveball out of nowhere. A bunch of guys … kind of ad hoc out there in left field, … it’s not a law they’re writing. It’s not anything real. It’s not even a memo, really, or even a memo of understanding. So there’s no consequences to anything they’re going to come up with, but for whatever reason, they come up with something that eventually blows the deal up? …
It does blow the deal up, but they certainly didn’t intend that. They were being encouraged by the White House to get out there.
Now, it’s unclear whether the White House was that very night saying, “Get out there; get out,” but they had been encouraged in the past, because the White House felt that it would be useful to have a plan that raises taxes that had Republican support.
And so these guys, they were random guys. They were mostly people who had served on the Bowles-Simpson commission and had already voted for this kind of deficit reduction plan, and they were interested in advancing the cause of a far-reaching deficit reduction plan.
But this problem of whether revenues comes from raising taxes or economic growth had bedeviled this group as well, and so they had been struggling with that.
At any rate, they thought, “OK, what could we do to help? The best thing we could do is just get out there that this is what we’re thinking about.” And to talk to them, they genuinely had no idea how it was going to be received.
Did they know that Boehner and Obama were a hair’s breadth away from a deal?
No, they say they did not know, although one of the members of the “Gang of Six,” as it was called then, was Sen. Dick Durbin [D-Ill.], who was very close to the White House and had been keeping the White House apprised of what was in this deal, this emerging framework, whatever it was.
And [Sen.] Saxby Chambliss [R-Ga.] was on?
Saxby Chambliss was also in the group, and he’s very close to Boehner. … So you would suspect that everybody knew something they claimed they did not.
So they are rolling out their thing. I think it was like a 10 a.m. meeting, no press, on the second floor of the Capitol on the Senate side. And they are somewhat shocked to find that half the Senate shows up to hear about this thing. …
So suddenly plopped into the lap of Obama and Boehner is this plan that Republicans are supporting and, as it turns out, that has $2 trillion of revenue in it over the next decade — not $800 billion but $2 trillion by some measures. By other measures, it’s $1.2 trillion. So it’s a lot more money.
The White House by all accounts kind of freaks out. Now, I think Boehner’s people think this was all a calculated thing that the White House was trying to manipulate them to up the revenue offer. But everything that we’ve heard from inside the White House suggests there was a little bit of panic when they realized that Senate Republicans were coming out in support of this giant new revenue figure.
And so they looked at each other. “We can’t sell this to Democrats at $800 billion if [Sen.] Lamar Alexander [R-Tenn.] and Saxby Chambliss are signing on to $1.2 trillion.”
And was it extracting the pound of flesh from the entitlements that the Boehner deal was?
It still had the entitlement cuts. The big problem was the revenue. That was the really big problem. And as Bill Daley told us, Senate Democrats already thought we were crap negotiators, so how could we take $800 billion to them when clearly there were Republicans willing to do much more?
So the president was in a box?
The president was in a box. Was it a box of his own making or not is unclear, but he was in a box.
Then what happens?
So there’s still nothing from the White House, and Boehner’s guys are sitting there waiting. And … late that evening, they finally get an offer back from the White House. It is not an official offer. It says, “Rob Nabors’ draft.” It’s from the president’s liaison to Congress, not even from the economic adviser or the Treasury secretary. “It’s just me,” Nabors says, “floating this to you.”
And it asks for another $400 billion in revenue. And Boehner’s guys feel like they made very clear, “We can’t do that.” But the White House insists that they did not.
So talks sort of drag on for several days more before they collapse, but to talk to Boehner’s guys, the minute they got this thing back and it says, “We want another $400 billion,” they couldn’t see a path forward.
Any sense of how Boehner reacts when he hears about it?
No. … I know Cantor immediately says: “This just proves you can’t trust these guys. There’s no way that we can either do this or now trust them to do a deal at all.”
That’s consistent with Ryan’s feeling from the past problems.
That’s right. And it’s not clear to me whether Boehner thinks they can somehow forge ahead, because they don’t go ballistic. I mean, at this point, the talks are still not known publicly.
We still don’t know that this is happening, and I believe the substance of those negotiations doesn’t become clear until maybe a day later when leaks start coming out from the Republicans that, “Oh, my God, Boehner’s talking about a trillion dollars in revenue.” The Senate Democrats start leaking the news that Obama’s offering to cut Medicare and Social Security.
And so whether or not Boehner at that moment thinks that this whole thing can be salvaged, news of it starts to leak out to the various caucuses, and they start going ballistic. …
… How does the word come to the president of the United States that the Grand Bargain is not going to live?
Obama meets with [Senate Majority Leader] Harry Reid [D-Nev.] and [House Minority Leader] Nancy Pelosi [D-Calif.] that Thursday night, and he tells them that he may not be able to get the 1.2. He might have to go with the 800; are they on board? And they say yes. They’re not happy, but they say they’d be willing to do it.
The next day is Friday, and they’re expecting a call from Boehner, and it does not come all day long. … At that point they knew that it was all gone to hell, because Boehner then schedules a press briefing for 5 p.m. At this point, I think the White House has been told to expect a 5:00 phone call from Boehner. …
We think this is to announce a deal, and I get to the conference room, and Boehner’s in there, and he’s sort of chuckling around with reporters or joking about his tan and [how he’s] been on the golf course and he seems in a good mood. And I got an email on my Blackberry from the White House saying: “We think it’s fallen apart. We think he’s going to blow it up.”
And I looked up, and I said, “Mr. Speaker, are we here for good news or bad news?” And he didn’t answer, but he left that room to go call the president and tell him, “Yeah, the deal’s off.”
So he’s sitting there sort of making the president wait, joking with reporters about his tan. He goes off to call the president; his guys walk in, and they start laying out for us why they can’t do this deal. And, you know, we’re all there going, “Holy –!” It’s just fallen completely apart.
Then we have those amazing press conferences that night where the president is just visibly angry and is furious about the fact that the House speaker has just walked away from him, not even giving him the courtesy of an opportunity to continue these negotiations. He’s just cut him off at the knees without responding to this offer.
And Boehner, equally astonishingly, does his press conference where he publicly announces that he was willing to do $800 billion in revenue having walked away from that deal. So I was just blown away, because he was putting on the record “I’m ready to raise taxes” very publicly.
But the president wanted too much in taxes, so you have this moment where both sides are sort of acknowledging how close they were, and yet they cannot get there. And it was one of the most perplexing, crazy things.
Why did it roll out that way? What do you think?
… You’ve got to remember, tensions were unbelievably high. The economy was still kind of in the tank. This is now, I believe, one week from D-Day, and we’re heading into the weekend with the best opportunity for preventing economic cataclysm on a global level from occurring, is now gone. There is no deal. So everybody is pretty freaked out. … It was an amazing moment.
… I gather the president just walks away from it all. Is that actually what happens?
No. They claim that he calls Boehner … and says, “Can’t we please just go back to the deal that we were so close to negotiating?,” and Boehner says no. And the White House says this is evidence that Boehner could never have done the deal. But Boehner’s guys say, “How are we supposed to trust him at that point?”
So it was a complete collapse of trust and I think on both sides, because the White House now at this point has no faith that Boehner represents anybody, even Cantor. Who is he leading? And Boehner’s guys are like, “Well, these guys are pulling the rug out from under us at every opportunity.” …
It’s just at a really sour point, and in that regard, it’s sort of shocking that they were able to put something together again, because what ultimately happened was the Senate — which at this moment is a bastion of rationality compared to the House — Mitch McConnell, the Republican leader [from Kentucky], holds a press conference and says, “I’ve got this idea for how we can get this done so the Republicans don’t have to vote to raise the debt limit.”
It was like this Rube Goldberg contraption that would let the debt limit go up, solve their problem, but Republicans would never technically have to vote to approve it. And Harry Reid and the White House kind of latch onto this as the lifeboat is being lowered to them.
The problem, though, is they’ve still got to get budget cuts, because Boehner has set these terms that he’s not going to increase the debt limit without budget cuts. So they’ve got to figure out how to put that together. So they do a trillion dollars over 10 years, budget caps — that’s accepted fairly easily. That was going to be part of the deal anyway, and they need another 1.2 I believe, and the question is, how do you get to those savings?
So Harry Reid, the Democratic leader in the Senate, has an idea for that, and he says: “Why don’t we create a special committee? We’ll just let them do it.” So that last week becomes a marriage of these two sort of Rube Goldberg, “Get Out of Jail Free” things to sort of patch together.
The problem then becomes, how do we force ourselves to deliver on this extra savings? And they get dredged back down into a whole taxes-versus-spending argument over that, over the trigger.
In the end, Boehner will not accept a trigger that would automatically raise taxes, and we get this automatic sequester that cuts the defense department and cuts domestic agencies. And the Democrats suggested this thing because it’s like, “… We think that automatic cuts to the Pentagon will be very painful to you, so that will force you to come to the table on a balance deal to get the rest of this money that we’ve agreed to do.” So that’s in the end how they patch it up.
And it gets kicked down the road beyond the election, so one of the things [Obama] feared the most, which was we’d be litigating this —
In the middle of the election, doesn’t happen, that’s right.
… The super committee meets, and in the end, here we go again. They can’t come to an agreement on what ought to be cut.
No, they can’t. Well, they can come to an agreement on cuts; they can’t come to an agreement on taxes.
On revenue, right.
And everybody could see the consequences at that point were a year off, so nobody had high hopes for that. And Boehner asked Paul Ryan to serve on it, and Paul said, “You know what? I think I’m going to sit this one out,” because it was not intended to work. It was intended to get them out of the box they were in on the deadline.
So everybody figured with a new president, whether it’s [former Gov. Mitt] Romney [R-Mass.] or Obama, now there would be a sort of month, six weeks, where what they couldn’t do in the summer of 2011, they’ll do now?
So from the Democratic perspective, if they got out of the super committee without a deal, that would set up this enormous opportunity. And from a year away, that’s what it looked like, this enormous opportunity, because if you got past the election, and if you got Obama re-elected, and if you held onto the Senate and you were sitting in the catbird seat again, you would have the hated George W. Bush tax cuts expiring in December of 2012. That’s worth something like $4 trillion in revenue over the next decade would suddenly come raining down onto the government if nothing happened.
Gridlock suddenly was the Democrats’ best friend. They don’t need anything to happen. From a year out they’re saying: “Wait a minute. Taxes are going to go up enormously, and we don’t need an agreement with these guys. It’s just going to happen.” … The question is what kind of deal we can cut with the Republicans with that hammer hanging over their heads.
And the status of the Republicans one year out?
They could see this fairly scary situation developing, and they did put revenues on the table. In fact, it was kind of a breakthrough. One of the members of the super committee was [Republican] Sen. [Pat] Toomey from Pennsylvania, who had been the head of the Club for Growth, which is this virulently anti-tax, pro-free enterprise organization.
And Toomey, who has impeccable conservative credentials, offered a plan that would have raised about $300 billion in revenue over the next decade. And it was real money. It wasn’t this fuzzy economic-growth thing. Sen. Dick Durbin at the time called it a breakthrough. “We finally crossed the Rubicon, where Republicans are willing to talk about taxes.”
It wasn’t enough. Democrats were never going to cut entitlements for $300 billion, but it was a sign that the Republicans knew the day was coming, and in fact, that $300 billion was not the farthest they went. It was a secret deal that was brewing between Dave Camp, the chairman of the House Ways and Means Committee, and [Sen.] Max Baucus [D-Mont.] to raise even more money, and they couldn’t sell that to their side.
But Boehner’s office at the time was like: “You know what? We get to December 2012 and all the Bush tax cuts are going up. Our guys are going to regret that they didn’t settle for the 600.”
“Our guys.” meaning the freshmen?
Meaning the Republicans, yeah. The 600 is going to look awfully good when we’re staring at the expiration on the Bush tax cuts.
What are you watching now? Where are your eyes waiting for whatever’s going to happen between now and then? Is Boehner relevant? Is Cantor relevant?
Boehner is the ball game. His speech yesterday was fascinating. I mean, the lyrics hadn’t changed, but the music sure had, and I think everybody is ready to get this behind them.
Two years of fighting has not been good for anybody. It’s true that the Republicans have really taken it on the chin and have terrible approval ratings because of all this gridlock, but Democrats are also emerging from these two years with virtually nothing to show for themselves as leaders, particularly Obama. And this whole budget fight has prevented him from getting the kind of stimulus that would help the economy that he’s been desperate to get.
So it’s been blocking everything. They can’t do anything until this is fixed, and you get the impression that they are just so sick of circling the same wagons over and over again. They know what they need to do; they know how far each side can come; they just need to get it done. And you got the impression yesterday that all sides were ready to sit down and do something.
But what about those freshmen who are now sophomores?
That’s still the problem. I spoke to [Rep.] Jim Jordan [R-Ohio] the other day on election night, who’s the head of the Republican Study Committee — it’s the even more conservative wing of the party — and I’m like: “So your whole thing is you don’t want to raise taxes. But if you don’t do anything, taxes are going to go up.”
He’s like: “Yeah, it’s a really hard position to be in. But we still don’t think we should compromise.” He said: “Those freshmen were sent here two years ago with a mandate to stop Barack Obama. We were sent here with a mandate not to compromise, and so that’s what we have to keep doing, even if taxes go up, even if our failure to compromise means that we achieve the opposite of what we’re trying to achieve.”
And that’s sort of the problem that we face right now, is that there’s an ideological motive that trumps even achieving the goals that you want to achieve. …
The 2012 election is over. What has changed? Does Obama come away from the election with a mandate to negotiate harder? …
The election served primarily to really amp up Democratic expectations for what they could get out of the fiscal cliff. Obama not only won the White House decisively, but they picked up a surprising number of seats in the Senate, which they had thought they were going to lose entirely to Republicans, and they made gains in the House.
So you came out of the election with this concern that Democrats were going to demand that the upper income tax cuts expire for rich people. They were going to have a hard time compromising on that, and people were already at that point saying Obama may have overplayed his hand in the 2011 fight. Is that going to happen again? So it was a very energized Democratic Party coming out of the election.
The Republicans … come out of it pretty shocked. … What’s going specifically through Paul Ryan’s mind, and why does he end up coming back?
Ryan has been very difficult to get a read on. People in the Republican Party were surprised that he came back, number one. And then he played a very minimal role in this whole thing publicly. He wouldn’t even talk to reporters for the most part. He kept telling us in the hallways, “You know, I’m not doing press now.”
But the staff who had been working on all of these various scenarios throughout the summer — if Obama wins, if Romney wins, if this, if that — they were not that surprised. They had been sort of gaming out an Obama victory and a return to the terms of the 2011 deal, or how to square the circle on the upper income tax cuts. So a lot of the tax staff who I’d been dealing with through the summer seemed pretty certain that Obama was going to be back in the White House.
This is the Republican staff? Really?
Yeah. They just saw the electoral path was not there for Romney. I was really surprised. People were obviously hopeful that Romney would win, but the guys who actually could see the hard work that lay ahead for them if Obama won had no illusions that they were going to avoid that hard work with a Romney victory.
So how were they preparing?
They were literally gaming out, how do we negotiate this whole fiscal cliff? What if the Republicans still have the House and they take the Senate but Obama’s in the White House? What if the Democrats take the House? So all of the various permutations, trying to figure out where the incentives would lie.
And then on policy, they were trying to figure out in the innocent days of August and September, we thought that the policy question would be how to give Democrats the extra tax money on the rich people [with incomes] over $250,000 without raising the rates? Because that was the line that Boehner had drawn. And so there was a lot of policy effort being put into that question. What are the other ways in which one might raise that money so that everybody could win?
And Boehner? Those are Boehner’s people as well that are involved in all that?
It was Republican leadership people. Boehner’s guys also were so focused on some of these questions, like where is the compromise if Obama wins?
Cantor comes back. What’s his position? How does the election affect him?
So Cantor was surprising because he, after the election, was one of the biggest proponents of the idea that elections have consequences. Obama won, he’s here for four more years, and we have to figure out how to work with this guy.
So he fell in line behind Boehner in a very low-key way. Again, you didn’t hear Eric Cantor coming out and making a lot of public pronouncements, like Ryan trying to stay in the background. But by all accounts, Cantor was an extraordinarily loyal number two post-election, whereas there had been friction earlier.
How does Boehner consolidate power? …
The election seemed to help him at first. He had been an advocate of compromise and getting this done all along, and people I think began to see the wisdom of that approach. They began to understand that you can’t run the country when you only control the House of Representatives.
Some of the firebrands lost, like [Rep.] Allen West in Florida. Some of the others that came back began to see that nothing was going to get done if they didn’t give the president what he wanted, which was the way they put it. You know, the president won. He campaigned on higher rates for the wealthy. It’s extraordinarily popular in the polls. We might oppose it, but there seemed to be this dawning sense that there was more to governing than simply blocking things and demanding things your way.
And Boehner seemed to do a pretty good job of channeling this into support for his negotiations with Obama, which began almost immediately after the election. He had put together a group of leaders who would be meeting with him daily: Ryan, Dave Camp and [Rep.] Fred Upton [R-Mich.] of Energy and Commerce, in addition to the elected leadership team.
These were the guys that were coming together; they were keeping people informed. Everybody was working as a unit as Boehner launched into this next round of negotiations.
Does he pull closer to him Cantor, Ryan, knowing that he needs these guys more than ever?
I didn’t get that sense. … [Ryan] announced right off the bat that he was going to be a team player. And there seemed to be this sort of sense of almost defeat. Boehner seemed to have the only path out of this ugly situation, and there seemed to be this collective acknowledgement that the battles of the past two years have gotten us to a point where we can’t just keep fighting; we’re going to have to compromise somehow.
Getting rid of the four congressmen from their corporate seats — what was that all about?
He was trying to send a message that it was time for people to fall in line. I think there’s also an element of [the] personal; apparently they were irritating to many people. But he was trying to send a message that things are going to be a little different, and we all need to pull together as a team. …
Boehner’s speech the day after the election. Take us to that moment. What’s it like? How does he appear? …
It was a quick announcement that he was going to make this speech, and it was billed as a major speech. It was in the Rayburn Room, which is just off the floor of the House floor in the Capitol, very ornate room. And Boehner is using a teleprompter, which is very unusual for him, so you could tell this was a big moment.
The speech was his offer to Obama, his peace offering. He had briefed his leaders about what he was going to do, and he came out and within 24 hours of Obama winning the election, he put revenue on the table. He said: “We understand, Mr. President, that you have won. We’re ready to compromise on revenue.”
I believe he used a line that was really striking at the time, something to the effect of: “We’re ready to be led. We want you to succeed. Lead us, Mr. President.” And it seems almost like the Republican Party baring its throat and saying: “All right, we understand we lost. We’re ready to get this done.”
The caucus’ reaction to it, especially the part where revenues are laid on the table?
There was a “hell no” faction, but for the most part, people were trying to figure out how to accomplish the president’s goals. There was a widespread recognition that the president had campaigned on this issue and deserved Congress to give it to him. Even if they didn’t like it, they recognized it.
And this was how the line in the sand over rates evolved. They decided they were going to give revenue but they weren’t willing to raise rates. So how can we raise $800 billion in revenue without raising the tax rates? And that occupied weeks, that whole conversation.
Who makes the first move? … What happens in the very beginning?
So that was the alarming part, I guess. Boehner comes out immediately after the election and says, “OK, let’s do this,” and the White House reaction was to just slow-walk it, and there was no reaction for I want to say a couple of weeks.
And the sense was the White House was trying to push Republicans up to the deadline so that they could wield maximum leverage. So the later it got, they thought, the more that they would be able to extract from Republicans.
I want to say that Boehner gave that speech on a Wednesday. Another week and a half passed before they had that first meeting at the White House, and it was one of these public dog and pony show meetings where not very much gets accomplished. Everybody comes out, they say, “OK, we all want to work together,” but then it’s another like at least a week, maybe two weeks, before they actually start to trade offers. And when they do start to trade offers, Boehner has finally put revenues on the table. The White House would argue that there were no details there; we didn’t even have a number, $800 billion over 10 years, for a long time. But when the White House made its offer, it was their budget. They had made no concessions to the Republicans.
So here you are three or four weeks after the election, beginning of December, and negotiations haven’t really even begun yet. They’re still sort of staring at each other. It was kind of shocking. …
… So the negotiations are starting. You’ve been talking about a few weeks there when nothing is really going on, but the president is busy; he’s out on the road; he’s campaigning. Why is this? Is this lessons learned from how the negotiations went in 2011?
The White House felt that the president looked small in 2011 when he got mixed up with Congress in these tit-for-tat negotiations. So they decided: “Look, we just won the election. We have a very popular issue. It’s not only poll-tested, it’s battle-tested, and we’re going to go out there and sell it.”
And it was surprising. The one thing people took with them after the election seemed to be that President Obama was going to raise taxes on the rich people. And he went out there, and he said: “This is what I want, and I don’t want to go over the fiscal cliff, but I campaigned on this. I want this.” And their theory was that this would increase the pressure on Republicans to capitulate.
Did it work?
In the end, they did get higher taxes on a portion of the population they wanted to hit. But the sweat box that they were trying to create on the Hill I think was not as powerful as they wanted it to be, because there were a lot of things that were supposed to get accomplished in the fiscal cliff debate according to the White House, the big one being they wanted to delay another fight over the debt limit for at least another year or two years, and they didn’t get that.
So where is the White House? I think Boehner definitely wanted to go back to the terms of the 2011 deal. He thought that the fiscal cliff would be the moment when he would finally consummate this negotiation that he had begun with Obama.
But going back to the idea that Democrats were really a little unrealistically amped about the election, what Obama laid on the table was twice as much revenue, and for weeks they were just unwilling to concede on that number. And they were not making any concessions to the Republican demand that we can’t go back up to 39.6 percent on the rates.
I wonder sometimes if their refusal to negotiate was part of the reason why we accomplished so little in the end and it became another one of these emergency, “Oh, my God, we have to pour water on the fire. Forget about trying to rebuild the house,” you know, which is what it was meant to be. …
… The Dec. 13 meeting — what happened? Why was that an important meeting?
It was an important meeting because that was like the darkest hour before the next darkest hour.
Things had not been going well all week between Boehner and Obama. They had met the previous Sunday and seemed to be making some progress, but then Republicans were upset because the White House had lowered the amount of money it wanted for taxes but then yanked it back up again.
They thought the president was not serious, which caused them to react in a fairly defiant way, and they were refusing to move on their side of the equation. So the week progresses, the two men talk, they have a testy phone conversation, and heading into the weekend, Obama summoned Boehner to the White House really, it appeared to us, just to give the impression of movement, to create the sense that things were happening even though it didn’t appear that things were in fact happening.
… And at that meeting, Boehner tried to argue that what they needed to do was return very specifically to the terms of the deal that they had hatched in 2011 where they would get $800 billion in revenue, but they wouldn’t do it through tax increases; they would do it through tax reform to come later in the year. That would help him get it through his caucus; Obama would get his money.
But the White House at this point was having none of this stuff. They had won the election; they had Democrats on the Hill who were expecting double the amount of revenue that Boehner had offered them in 2011. They were expecting, if nothing else happened, tax rates to go up on rich people, and the White House continued to insist: “John, we need to get serious about this. We won the election. You need to start negotiating on our terms.”
And this discussion about Boehner asking: “Well, wait a minute. I’ve got $800 billion on the table”?
That’s where he was in 2011, though, and the White House argued that with the passage of time, $800 billion over 10 years a year later was actually worth less. It was now more like they wanted $950 billion; that would be the equivalent.
So from the White House’s perspective, Boehner’s offer was moving backward. And from Boehner’s perspective, he had never really presented this $800 billion to his caucus in 2011. There was never a moment when they had an ability to express their view, and I think he honestly believed that somewhere between 800 and a trillion was as far as he could push his guys. And meanwhile, you had the president saying: “I want 1.6. I won.” …
The next day, Dec. 14, take us to that day. What happened? …
Things broke up Thursday night. The reports were that that meeting had gone badly between Boehner and Obama. Senate Republicans are at this point vibrating they’re so stressed out about the possibility of taking political blame for what they see as the mess in the House.
So there’s this movement on the Senate side among Republicans to start to try to figure out other strategies to try to get this thing rolling. So it looked as if we had reached an impasse between Boehner and Obama.
And then that Friday morning, the Sandy Hook shooting occurred, and the president addressed the nation in a very emotional — I mean, he was crying — statement on TV. And a few hours later, Boehner called and said: “We need to talk. I’m willing to raise rates on income over a million dollars.”
That began the first real weekend of negotiations between the White House and House Republicans where they came very close, as close as they were going to get, to reaching a deal.
… Explain what happened that was so significant where it was actually creating movement where there had been no movement before.
Because up until that point, Boehner had insisted, Republicans generally had insisted that they were willing to raise revenue and they were willing to raise tax revenue, but they were not willing to raise rates. They were still insisting this be done primarily through tax reform.
So on that Friday, [when] Boehner finally offered to let rates go up from 35 percent to 39.6 percent on income over a million dollars, was the first time that they had made a substantive move toward the president’s position.
So it becomes public. Explain what happens and what that does to the deal.
It became public on Saturday, broke on Saturday night, which caused a lot of alarm among rank-and-file House Republicans who had no idea that Boehner was going to make this offer.
And I think that the damage to his case was compounded on Sunday when it became public that he had also offered to delay the fight over the debt ceiling for another year, because Republicans were thinking that, OK, if we have to give [in] on taxes now, we’ll always have the debt ceiling as another backstop to get the spending cuts we want.
So before Boehner had a chance to explain to them how he saw this package coming together, it was revealed first in Politico and then in the [Washington] Post that a, Boehner was willing to raise rates on income over a million dollars and b, he was giving away the debt limit, is how it was viewed, even though Boehner saw it as a justifiable trade because he was asking for spending cuts commensurate with the increase in the debt limit.
So they had a plan to sell this to their caucus, but they never got a chance to really do it. …
So the White House is clearly excited, even though the leak is coming out.
Yeah, they think things are moving. … They did have that meeting on Monday morning where, again, these guys seemed to totally talk past each other when they get together.
It happened during the 2011 fight, and it seemed to happen again that morning where Democrats say that they had this meeting, it went really well, they thought things were really rolling; and you talk to the Republicans, and they’re like, “No, he told them at the meeting that he wasn’t going to be able to do $1.2 trillion,” or whatever the issue was.
It seems like Boehner and Obama both seemed to want it so much that they hear what they want to hear when they’re in the room together, and then they leave, and their staffs look at what they’ve done, and it all falls apart, which is exactly what happened that day. …
It certainly surprises the hell out of the White House later. It seems like they were just negotiating again, if you listen to them, and their number was higher.
… There’s already trouble brewing from the Republican perspective. The White House, meanwhile, thinks that everything’s on track. Boehner comes back, and he meets first with the “daily management team” as he called it, which is the core group of Cantor, Ryan, Camp, Upton, McCarthy, and then meets with the larger group called the ELC, the Elected Leadership [Committee], which is the same group of people but slightly expanded.
At those meetings, everyone speaks against the deal that Boehner’s put on the table. Leading the charge were Paul Ryan and Dave Camp, and Dave Camp was very concerned that if they got much north of a trillion dollars in revenue that it would just blow up tax reform. You wouldn’t have the money to reduce rates.
So you get into that meeting. It was late afternoon, and every single one of his leadership team is voting against this idea of raising taxes on an income over a million dollars and raising a trillion dollars of new revenue. And Boehner at this point has nothing to talk to the White House about because the White House is still at a higher number. So he comes out and announces that it’s time for Plan B, and the negotiations collapse.
With Plan B, what is the plan, and how does it move forward? …
… Plan B was a way for Boehner to get something through the House that would become a procedural vehicle over in the Senate. The whole idea of that thing was for Boehner to satisfy Obama’s demand for additional revenue without making his guys vote for something that he viewed as too painful.
So Plan B first was going to be side by side. First, it was going to be the Obama plan: raise rates on income over $250,000. Vote on that, show that it can’t pass the House, and then vote on a different proposal which would have had the effect of raising rates on income over a million dollars, far less revenue.
I want to say it was only about $400 billion in new revenue, but the way they were going to sell it to the House and the way they attempted to sell it to the House was this is a $3.9 trillion tax cut. It’s the largest tax cut in American history. It’s going to save 99.9 percent of American families from taxes going up in January and you should be for it. And they weren’t. They did not want to vote on it.
Was the idea that it would then go to the Senate, the Senate would finagle around with it and probably bring it down to 500?
The idea was that it would give Republicans some leverage where they had virtually none, because if they could demonstrate that the $250,000 threshold would not fly in the House even after the election, but they could get a million dollars through the House, then that would give them some negotiating leverage in the Senate. …
It was really unclear what the strategy was going to be once it got over to the Senate, because I think Democrats would have gone over the cliff rather than accept a million dollars. So where McConnell was going to take it, he had a lot of different contingency plans, and it was just kind of unclear how he would have used that vehicle. But it certainly would have kept the number far above the number that Obama wanted.
So first you’ve got to get it through the House, though. So there’s stories … that Boehner works hard, harder than normally, going around and patting people on the back on the floor and tried to cajole them and discuss what this will do and why they should vote for it. …
He normally does not whip personally. He usually lets his whip team do it. But that week, they had a series of votes. They were keeping these guys on the floor all day on a couple of occasions so they could try to figure out if they had the votes to move forward.
And so Boehner was out there circulating among his guys, clapping them on the back, sitting with at one point I think it was with both of the South Carolina guys who were extremely conservative, trying to talk them into voting for this thing.
And he was making some progress. There were people coming out into the speaker’s lobby talking to us reporters saying: “We understand that we need to do this. This would spare 99 percent of Americans.”
Behind the scenes, Republicans claim, Boehner’s team claims that there were 230 Republicans who were ready to support this thing, or who wanted this thing to pass is the way they put it. What they lacked was 218 Republicans who were willing to publicly vote for it.
In the end, in one of the most stunning days I’ve ever seen in the Capitol, he pulled everybody into a caucus meeting that evening around 7:00 and told them that they didn’t have to vote on it. And a cheer went up, and Boehner came out and recessed the House, and he left the building, and Cantor left the building, and they said it was up to the Senate. “It’s now up to the Senate.” Completely abdicated responsibility for solving this problem. …
… The way it’s been defined is the Pledge of Allegiance is said, then he reads the Serenity Prayer.
They always start their caucus meetings with a prayer, but usually Boehner does not himself deliver it. On this particular night he offered to say the prayer, and he delivered the “God, grant me the serenity to change the things I can, to accept the things I can’t, and the wisdom to recognize the difference.”
Boehner’s team claims — and it may be true — that he gained authority that night by not making these guys vote for something that they didn’t want to vote for. But to the rest of the world, it looked like he had just completely lost control. This was his plan, and he couldn’t even get his guys to rally behind it.
… But also at the end of the meeting, [Rep.] Mike Kelly goes up and grabs the microphone and he goes: “Really? We can’t support this?” Tell that story if you know it.
Mike Kelly, who was from Butler, [Pa.], used car salesman, played football at Notre Dame, he’s a very team-oriented guy and not a fiscal wizard by any stretch of the imagination, but he always gets on board with what they ask him to do.
And early in the week, Kelly had been very resistant to Plan B, but by that night, he had come around to essentially supporting Boehner. He still didn’t like it, but he was ready to support his speaker.
So as the caucus is disbanding, Kelly runs up and grabs the mic and says, “Can’t we support our speaker?” You know, very confused. “How can we not support our speaker?” And it was a humiliating moment for Boehner.
The next meeting is the Friday, Dec. 28, meeting. … Boehner is outside the Oval Office and talks to Reid. What happens? How do the emotions show? …
So after Plan B collapsed, everybody took four or five days off; everybody needed to get away from it.
The Senate came back into session that Thursday, and Harry Reid took the floor. It was now up to the Senate, clearly, and the White House was putting the finger on the Senate.
Neither Harry Reid nor Mitch McConnell wanted to be in this position, because they both knew that a deal was going to require them to do stuff they didn’t want to do, and they really didn’t want their fingerprints on it.
Harry Reid had been on the Senate floor castigating Boehner for refusing to bring up a bill that the Senate had passed in the summer that would have extended the tax cuts for everyone under 250. And he was denouncing Boehner as a dictator … and accusing him of valuing his speakership above the good of the country.
So that Friday, the next day, they all gather at the White House, and Reid and McConnell are sitting in the West Wing lobby, waiting to be taken into the Oval Office, and Nancy Pelosi is not there yet, and Boehner walks in.
He doesn’t even take his coat off. He walks right up to Reid, who is sitting on a couch, points his finger at him and says, “Go eff yourself.” And Reid looks up and he says: “What? Excuse me?” And Boehner says it again. And Reid had no idea what to make of this and just stared at him.
This is right outside the Oval Office. What does it say about how messed up [things were], and [how] the tensions were so over the top at this point?
Boehner clearly had no idea how to regain control of his chamber, and I think what Reid said on the floor had struck a nerve, and it had long been rumored that Boehner couldn’t cut a deal until he was re-elected speaker on Jan. 3. And there’s Harry Reid saying it out in public that John Boehner cares more about his personal hold on power than the taxes of the vast majority of Americans.
Take us into any part of that meeting. …
Boehner was clearly at a low point, and they were saying the same talking points over and over again: The Senate needs to act; the Senate has to act. The House has acted; the Senate needs to act.
In this meeting, people in the room describe him as behaving sort of very much like a sullen schoolboy, sitting at the far end of one of the sofas in the Oval Office and arms crossed and refusing to say anything. One Democrat said he looked like he needed a cigarette the whole time.
And so the Democrats are trying to extract from McConnell what will work, what can we get. And McConnell’s playing his cards very close to the vest, but they view him as engaged and clearly open for business — “operational mode” is the way one Democrat put it.
Boehner, on the other hand, at a certain point they’re talking specifics, and so they want to turn to Boehner and say, “Well, do you think this would work for you, John?” And they said it was literally almost robotic. It was again and again, “The Senate needs to act. The House will take it up, accept it or amend it,” over and over, over and over.
Finally Pelosi said something to him about, “You know, John, are you going to be constructive at all here?” And he continued to be very uncompromising and uncooperative.
So McConnell and Reid get close? …
There are different versions about what happened. McConnell is trying to do a couple of things. He’s trying to get the threshold up. His initial offer on the group that should be taxed is I think $750,000, a little under a million, but nowhere where the Democrats want it to be.
He also wants to get some spending cuts in there so this thing has a chance of surviving in the House. And one of the things he asks for is a change in the inflation rate for Social Security, which is a total nonstarter, especially with Reid.
The White House is willing to contemplate it, and I think Senate Democrats think they could have gotten it through as part of a big deal that got all this mess off their plates once and for all, but not as part of this little emergency thing.
So that’s causing heartburn for Reid. They actually are moving closer and closer together on the threshold, but McConnell won’t take the Social Security thing out of his offers, and that’s irritating Reid.
Then from the other side you keep hearing that Reid was trying to use this thing. It was the last train leaving the station, and he was trying to pile everything into it: the [Medicare] “doc fix” and the tax extenders and all of the stuff that the Senate majority leader has to worry about getting done.
And so it was becoming this test of wills between McConnell and Reid, who were trying to accomplish very different things.
The telephone call to the vice president, or to the White House, describe that.
… It became this very slow and laborious process, and from the Republicans’ point of view, they’re waiting 12, 15, 19 hours to get responses to their offers.
Finally McConnell kind of throws his hands in the air and calls Biden and says, “Is there anybody down there who knows how to make a deal? Because Harry Reid is not doing it.” And so when you get Biden into the picture, you have two guys who are very comfortable with each other. …
So you’ve got like 13 phone calls back and forth, and they end up with … a pretty ugly deal where all the grand strategies that Boehner and Obama had been talking about from back in 2011, they were all gone. … What do you end up with very quickly, and sort of what does it represent?
You end up with the worst of all worlds, which is a punt basically. They delayed the sequester, the spending cuts for two months, setting up a new land mine out there to go off and to force them to do something else. That is going to be stacked up with the debt ceiling, so we’re building another cliff or molehill or something out there to force them to act.
They raise a little bit of money. I think in the end, they got something like $650 billion out of raising taxes on income over $450,000 a year, but it’s not very much. That’s $65 billion a year. We’re going to spend more than that on Hurricane Sandy relief, so that money’s gone already. So in terms of dealing with the debt, they did absolutely nothing. …
So they come to a deal; 2 a.m. in the Senate the thing passes with 89 votes. What’s the mood on the floor? …
I think people were just exhausted. This was New Year’s Eve. It was two hours after midnight. They’d all been trapped in the Capitol. And the thing that was shocking about it is for two years we’d been hearing both sides say how hard it was going to be to do any of these things. The Republicans just couldn’t raise taxes.
And then it finally gets out on the floor and 89 Senators vote for it, and it sort of makes you wonder why can’t they just start voting on some of this stuff and take care of it. …
So it goes to the House Jan. 1. There are two caucus meetings that day. … The [first] caucus meeting, why was that so contentious? What was the feeling at the caucus meeting, and why is there a second one scheduled, and what’s coming into play?
It was very clear that even after Biden and McConnell struck this deal, which caused such celebrating over in the Senate, that Boehner still did not have a strategy for this thing.
We had been told that McConnell had thrown his hands in the air and that he and Boehner were barely speaking. McConnell had helped Boehner come up with Plan B, Boehner couldn’t even deliver that, and so McConnell’s like, “All right, this needs to get solved,” because ultimately McConnell is concerned about Republicans having blame on their hands for what could easily have been a recession.
So he’s like: “OK, forget the House. I’m going to forge ahead, do my deal with Joe Biden, push it through here, and John Boehner’s on his own.” And that morning, it was pretty clear that Boehner was in fact on his own and did not really have a strategy for getting this thing through, because he still was holding onto this hope that they could somehow pass something with a majority of his majority and not turn the floor over to Democrats, which is how they viewed passing a bill with majority Democratic votes.
So they hold this first caucus meeting around lunchtime to talk about it. And they lay out the terms of the deal, of the legislation that has passed the Senate a few hours earlier. Boehner does not take a position on it, does not tell anybody what he thinks about it. He just lays out the terms.
Cantor emerges to say he doesn’t like it, but not much else. People start wondering: “Oh, my God, is this a coup? Is Cantor making his move? What does this mean?” In the end, it’s not clear that it meant anything at all except that they had no strategy for this thing. …
But they had run out of time. We were now at this point, the financial markets were going to open the next morning, and if there was not a deal, nobody was quite sure what would have happened. So in the end at that second caucus, they agreed that they would just have to go ahead and bite the bullet and push this thing through.
What’s Ryan thinking during this period of time?
Again, he’s not sharing his thoughts with the members of the press, but in the end, he voted for it, … splitting from a likely contender for the 2016 nomination Marco Rubio, who in the Senate voted against it.
I still to this day do not know what Paul Ryan was thinking, but what I’m told is that he’s always been a team player on this stuff, and he was going to back up Boehner.
Were you there when everybody was coming out of that first meeting? … What are you seeing as people are walking out of that room?
… There was just sort of confusion. You could tell they didn’t like it, but there didn’t seem to be a path forward for them. They weren’t sure how to handle it. They clearly didn’t want to be responsible for going over the cliff. They were now isolated. What, 40 Republicans had voted for this thing in the Senate?
So it was really a politically difficult position for them to be in to oppose, but even at that moment on New Year’s Day — with markets about to open the next day, we’re already over the cliff — they still didn’t want to vote for this bill to raise taxes on a few hundred thousand rich people.
So take us to the vote. What it’s like on the floor? What’s the mood? …
The floor was really strange because none of the Republican leaders, including Boehner, spoke for this thing. And usually the way debate goes, you have someone from each party who is shepherding the bill and leading debate and parceling out time to various speakers.
In that case it was Dave Camp, who was chairman of Ways and Means. Dave Camp wound up being the only member of Republican leadership to speak on this bill, and he did try to sell it as the largest tax cut in American history, sets the stage for tax reform, trying to put the best face on it that he could.
But we were sitting there waiting to see what Boehner would say, because his staff had been very assiduous in telling us that John Boehner has not taken a position on this legislation. He didn’t take it to the first caucus; he didn’t take it in the second caucus; he’s not taking a position on this legislation.
So I remember sitting there waiting for a quote from John Boehner about this bill, and he didn’t speak. The vote started, and he left that night, off the floor, reporters running up to him. “Mr. Boehner, you voted for the bill. Can you explain why you did that?” And he was just stone-faced, refused to answer. Got on the elevator and left.
Why did he vote for it?
He wouldn’t tell us. He put out a statement later that night that still didn’t tell us why he voted for it. In the end, he had to vote for it because he couldn’t be responsible for — the implications of going over the cliff fully were ugly. And this deal was also ugly, but it was the lesser of two evils, and Boehner recognizes that.
How does this kick the can down the road, and what’s the fight coming up? …
So the thing that they got rid of was we no longer have big chunks of the tax code that are temporary and that expire, creating crises and automatic tax hikes. We now have a permanent tax code for the most part.
But what we haven’t settled is the issue of deficit reduction. We haven’t really solved the problem of how to deal with these trillion-dollar deficits we’ve been racking up.
And because we’re racking up a trillion dollars a year in deficits, we’re racking up a trillion dollars a year in new borrowing, which means that the $2.1 trillion we’ve raised our debt ceiling a year and a half ago is now gone, we’re bumping up against the cap again.
So sometime in late February or early March, we’re going to have to stop paying our bills unless Congress lifts the debt limit again. And that fight is shaping up to be very much like it was in 2011: the moment when Republicans want to have the fight over spending cuts and entitlement reform.
The problem, though, is that at this point, the easy stuff is all gone. Even Republican members of the House acknowledge that you can’t keep cutting agency budgets as they have been doing. … What’s left now is the bulk of government spending, which is Social Security, Medicare, Medicaid, stuff that people like.
Republicans say they want to tackle this, and Democrats agree that it’s a problem, but nobody really wants to go after this stuff. So we’ve set up this distasteful situation where everybody says: “Oh, yes, we’re going to cut Social Security benefits. We’re going to cut Medicare. We’re going to figure out how to live within our means.” But nobody really wants to do it. It’s not going to be popular.
Except among the 87. It’s one of the things that the 87 and a lot of the conservative Republicans have been fighting for all along. …
Yeah, except that people don’t want smaller government. Polls show again and again that people like their Social Security checks. They like their Medicare benefits, and those are the things that are bankrupting us. It’s not what we’re spending on the Justice Department or the FBI. It’s these big expenses that constitute like two-thirds of our government that are extraordinarily popular. …
… This is a Washington that can’t do big deals, and yet we’ve got a big deal looming again.
I don’t know that the big deal is ever going to happen. In the end, these guys are going to have to decide piece by piece, do we want to reform the tax code? Do we want to fix health spending? What do we want to do about Social Security? And it just doesn’t seem as though it can be done as some kind of big emergency thing to get us past the next deadline.
And they’re not even talking to each other. … How the hell is this all going to happen?
I honestly don’t know. A Democrat on the House Budget Committee told me that he thinks the next fight is going to be far uglier and far bloodier than the fights that we’ve already been through because we’re down to the stuff that is the hardest stuff to do.
And as much as Republicans say they want to shrink spending, even they have trouble talking about Social Security and Medicare. So no one has presented a strategy yet. No one is out there talking about a path to get through this next problem. …
Jan. 3, take us to the Capitol. Boehner is up for the speaker position once again; there’s a vote. …
… Boehner’s standing for speaker. … A handful of Republicans vote against Boehner or vote present, or there were a couple of votes for Cantor, a couple of votes for random other people. But it doesn’t amount to anything.
It’s a protest from the far right. Some of these guys that are voting against Boehner are the very same guys that he’s booted off of those prestigious committees just a few weeks ago.
But it then emerges afterward that there had been a larger coup being planned by some of these same people who were hoping to force a second ballot, but the problem is there’s no candidate. Unless Eric Cantor is ready to make his move, who’s going to take over from John Boehner? Who would want to take over for John Boehner? It seems to be an ungovernable caucus at this point. So Boehner was re-elected. …
… What’s the hope of this very conservative group?
I would think that they are doing what they’ve been doing all along, which is screaming into the void without any expectation of an outcome. They are protesting against things they don’t like, but the problem is that things have to happen.
At some point something has to affirmatively happen, and there is no candidate other than Boehner. Cantor has not put himself forward. The effect was simply to weaken Boehner further in the public eye.
And in reality, can this man control this caucus?
I don’t think Democrats think he has any control over the caucus, which is why I say I have no idea how this debt ceiling thing comes together, because they’re already drawing more lines in the sand and they’ve got no way to meet them.
I mean, if we’re going to raise the debt ceiling to $2 trillion, when are we going to find $2 trillion in cuts? Even Paul Ryan’s budget doesn’t have $2 trillion in cuts.
And it comes down to the trust issue, I guess.
It’s not even trust. It’s that Democrats, the White House is really fed up with John Boehner. They feel like the guy negotiates things that he can’t deliver. He is not in control of votes, which is the primary thing that creates your power. So who do you negotiate with? It’s like an empty chair.
And Boehner in the same way is completely fed up with the White House?
They’ve never trusted the White House. They feel that Obama makes promises — he’s sort of the good cop, and then his staff is the bad cop — and that he never really wanted a deal; in a way that they always thought that he wanted to go over the cliff.
But that possibility won’t exist this next time around, because I think it’s universally agreed that whatever would have happened had we gone over the cliff wouldn’t be nearly as bad as if we stop paying our bills. So Obama’s going to want a deal. It’s just a question of what kind of a deal can be cobbled together.