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William Daley

Obama's former chief of staff talks about the difficulties of negotiating the nation's fiscal problems with a divided GOP. "To some degree, I guess … I underestimated that separation between Boehner and much of the caucus that he was trying to control," he tells FRONTLINE producer Jim Gilmore. This interview was conducted on Dec. 3, 2012. (57:04)

Obama's former chief of staff talks about the difficulties of negotiating the nation's fiscal problems with a divided GOP. "To some degree, I guess … I underestimated that separation between Boehner and much of the caucus that he was trying to control," he tells FRONTLINE producer Jim Gilmore. This interview was conducted on Dec. 3, 2012.

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    The effect of the 2010 election, once it took place, the Tea Party 87 came in. How does the president, how does the White House view what has just taken place, and how will it affect future steps?

    Well, I joined shortly thereafter, and in my conversations with the president right after the election -- and one of the things that really attracted me to do the job as chief of staff for this president was the fact that I really believed, at that time, when you had divided government, that President Obama's personality, his style and his political philosophy was such that he could -- and having seen divided government under Bill Clinton when Newt Gingrich [R-Ga.] was speaker -- that I thought President Obama was tailor-made for making a deal and making things work and getting things done with [Speaker of the House] John Boehner [R-Ohio]. Also believing that John Boehner is someone who is pretty well an institutional guy, wants to see the system work, has spent his career, the vast majority of it there in Washington, understands power and had a great statement at one of the first meetings of, "I didn't come to this town to have a big title; I came to do big things."

    So I think there was an expectation, and from a personal point of view, mine was very much that I thought this president could -- again, having been there in the last divided government under Bill Clinton as a Democratic president and a Republican speaker, I thought they would be able to get things done.

    But define these 87. How were these 87 viewed?

    Well, the 87 obviously came in on an enormous wave, a wave that the leadership -- John Boehner, [House Majority Leader] Eric Cantor [R-Va.], to a lesser degree Kevin McCarthy [R-Calif.] -- had really nothing to do with creating that wave. Newt Gingrich created the revolution in the late '80s and '90s, and he was the leader; he was the architect. And he drove that process.

    John Boehner and Eric Cantor kind of rode the wave that happened in '10. So when they took over control of that caucus, and especially the 80-some new members, they weren't beholden to John Boehner and Eric Cantor to the degree that Newt Gingrich had the relationship with the group that came in with him when he took control in '94. So it was a very different dynamic.

    To some degree, I guess -- and this led over the next number of months -- I underestimated that separation between Boehner and much of the caucus that he was trying to control.

    What do you mean?

    Well, I think there was a sense -- and I'm speaking for myself here -- that as speaker, and especially after listening to him say, often, that he wanted to do big things, that at the same time he was saying that these new members, many of whom had never held office, had no idea what a debt ceiling was, didn't know why we even needed it, so there was a bit of an education that had to go on, and that they came for one thing, [which] was to kind of throw the monkey wrench in the system and muck it up, because they believed that if it does anything, that's bad. And that's what they thought their charge was.

    And my perception historically of a speaker is that when the speaker wants to do something, he gets his caucus in line, and they get something done. And to a very large degree, the tail wagged the dog that year. We saw it in the spring when we had a continuing resolution fight, a budget fight, and the speaker set a marker down in what he needed for cuts to the budget in order to not shut the government down, and that was in March, when there was a major move afoot to shut the government down by many people.

    There are a lot of people in Washington who thought that, on the Democratic side, that it would be a good thing if the government got shut down, that we recreate the '95 Gingrich-Clinton fight and have this fight, shut [down] the government, go to the American people.

    The president's attitude was, the American people don't want this. They're still in the middle of an incredible economic downturn. People are suffering out there. They can't figure out their own lives right now, and the fact that the politicians in Washington couldn't come to some agreement and they wanted to shut down the government to have another fight was absolutely the wrong thing to do. ...

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    So let's clear up, because we haven't talked about it yet. So what caused this wave that Boehner and Cantor then --

    I think it was a combination. You know, we're just in the middle of the worst economic crisis since the Great Depression. You had Democratic majorities in House and Senate the first two years and the perception that the president rammed through health care, which was still at that point a very unpopular, relatively unpopular program and very misunderstood program. They had been able to define it.

    The president -- so he had that battle. He had the stimulus. And you still had this terrible overhang of an economy that just wasn't moving forward.

    And so that teed up. And [there was] a strong sense of the American people that the government was out of hand. I mean, the research showed dramatically that people wanted spending cuts to solve their problems, not taxes, not more government. President Obama came into office in '08 with the belief that -- and the public's belief in him -- that he was moderate, that he wasn't a big spender. The Republicans had done a pretty good job of defining him as a big spender using the health care bill as some model of that -- again, a misunderstood and poorly sold package of real reforms to the health care system.

    So that teed up '10 with a lot of anger out there in the country over the economy and lack of jobs, and a belief that Washington was focusing on something other than their problems, and they were more playing their games, and the president got the negative of that.

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    In December, [then-Secretary of the Treasury Tim] Geithner I guess went to the president and said, "You don't understand what a crisis this will be if the Republicans don't play ball and give us the change in the debt ceiling." … Was there a misunderstanding, especially with this new Congress, a new House that was controlled by the Republicans, a misunderstanding, a belief that the Republicans of course will raise the debt ceiling?

    Again, I wasn't there in December, OK? I think the sense was, no rational person was going to let the wheels go off the train here. No one's going to let the debt ceiling not be extended, and we've got time to work this out.

    I think there was a strong feeling that, because there wasn't a real understanding yet of the makeup of the new caucus, that the speaker, Boehner, was a reasonable guy, Cantor, you know, maybe a little more partisan, but things would work out, because they're not unreasonable people, Boehner. I think the perception, to be very frank with you, of Gingrich in '94 was much [more] of a revolutionary, aggressive sort of guy when he took over than people who looked at Boehner in the fall -- in December of 2000 [sic] and said: "Well, he's the next speaker. OK, there's a reasonable guy who seems to want to make things work. And his personality and the president's are pretty compatible in the sense of they're not loud, flashy, real partisan sort of guys with a lot of rhetoric. And they'll get things done."

  4. Ψ ShareOn realizing that Paul Ryan was in the audience of Obama's budget speech

    The April 13, 2011, George Washington [University] speech by Obama. What's the intention of the speech? Getting to the point really is, you see [Rep.] Paul Ryan [R-Wis.] there; you know what the speech is going to be; you realize there's a problem. Explain what happened.

    You have to back up. We wanted to give that speech earlier, but because the continuing resolution [CR] for funding of the government dragged on longer than we expected, we had to keep pushing that off. We wanted to frame the debt ceiling and the debt fight much earlier and didn't have the opportunity to.

    So at the end of the continuing resolution budget fight, and a lot of Democrats were, again, for shutting down the government, and seeing that Boehner was having trouble in his caucus, the decision was made that we had to frame this in a very aggressive way about what we wanted and what the president believed in.

    We invited Paul Ryan and every member of the Simpson-Bowles commission [National Commission on Fiscal Responsibility and Reform]. He was not invited as the budget director; he was invited, as were all of the members of the commission invited to the speech.

    When I saw him in the room, I thought, oh, my God, because the rhetoric in the speech was hot compared to what the president had done the first four months. But remember, he was getting beat up terribly by Democrats and by others saying, "You've got to get more aggressive. You've got to be more specific -- what you're for, what you're not [for]. Take it to them and be strong on what it is that you are laying out for your negotiations," because there was criticism that we had not done that in the CR fight, and he had not done that.

    Part of the problem, we came into that in a very real way. I joined in January, and we had a great intention to focus as much as we could on the economy and jobs, obviously. The Arab Spring blew up in January, and that really dominated much of the public discourse and the news for those months. And it really took an enormous amount of time, along with, to be very honest with you, the planning for the Osama bin Laden raid in numerous meetings going on very quietly of the president's time. So much of his time in this early spring had to be spent on international matters. And for those of us who thought the whole thrust of '11 was going to try to get to the domestic job creation, economic improvement, it made for a very difficult spring.

    So we come into the late-April speech, or April speech, saw Ryan there, thought, oh, my God, we've got a problem. I tried to get to the president to at least have him acknowledge Ryan. He mentioned Congressman Ryan in his speech, obviously, and the Republicans sitting there, including Ryan, took great offense, thought they were brought down as props for the president to attack them. It is not this president's nature in any way, shape or form to ever do that.

    So it was a mistake in some ways, but it was done in an innocent way, of inviting all of them down. And [commission co-chairs Erskine] Bowles and [Alan] Simpson were there, as were a couple of the other members of the commission, business and political people.

    Did it poison the well?

    It was taken by the Republicans as a partisan, aggressive fight -- message; pardon me -- by the president to them, from a guy who had been relatively quiet and not challenging of them, in spite of the fact that they had been beating the hell out of him constantly, and including the speaker was publicly very aggressive in a very negative way, obviously, about the president, about his policies. And they didn't hesitate -- they did not hesitate to keep beating him up all spring. …

    The reaction of the president or the White House afterward realizing, oh, my God --

    It's not the president's style to embarrass somebody in front of them. So when the speculation was that we brought Ryan down just to kind of dump on him in public, that's not the president; that was not the White House that I was running. And so we did feel bad from that perspective, that it was perceived as sort of a personal insult, because that was not the intent at all. And the president had respect for Ryan, and he engaged him, as you may remember, in one of those Republican caucus meetings.

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    There's the famous golf game, June 18. How do we come to the idea that there actually is the possibility of negotiations here? Why do Obama and Boehner want a deal? Why is Boehner interested in a Grand Bargain? …

    Well, the truth is, it started before that in many ways. We had begun the [Vice President Joe] Biden action to do the cuts. So after the process in, I think it was in May, that we began the meetings of Biden's crowd, we had a congressional meeting, and then they all went off to do cuts and find cuts.

    And there was a sense from the president early on -- and again, the president had had dealings with Boehner -- that Boehner had made it very clear that he wanted to get something done. And the golf game was kind of just a -- I mean, a lot of the press were screaming: "You've got to do this. You've got to socialize. You've got to get together with these guys. You guys don't even play golf." They're golfers. The spring weather was kind of nasty.

    I think more was made of that, to be very frank with you. If there was or wasn't a golf game, there was going to be negotiations and a discussion going on between Boehner and the president, no doubt in my mind. …

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    So the original discussions between the vice president and Cantor, Leader Cantor.

    Well, they had other members in the room, and they began to look at spending issues and making cuts and identifying cuts. And that was always done in a very positive -- and people were surprised. Even Cantor and the Republicans were reporting back through other sources that they were making progress. And Democrats were sitting there, identifying things that they could cut, and Republicans were sitting there identifying things.

    So there was a continuation -- there was a very positive sense that they were making progress. And Biden's style is very congenial, and he gets along well, and got along well with Cantor and had lots of discussions, and obviously is close to [Senate Minority Leader Mitch] McConnell [R-Ky.] over the years.

    Explain the role of the vice president. Explain the importance in this whole thing, and in his abilities and in his relationship with the president, about what he's doing.

    Well, no one knows the Senate better than Joe Biden; he lived there for 35 years. So there's a certain yin and yang to the system up there, that if you haven't really been part of it, it's hard to break into. I hadn't been part of it; I'd be the first to admit it was hard to kind of get into the club. But Biden understands that, and they have faith in his word.

    So in December of '10, when there was a deal on an extension of the tax cuts and avoiding that, and the payroll tax issue, Biden was at the center of that. So there was a belief that -- and an understanding that that's just the way of the vice president -- that when and if this thing comes together, the vice president is going to be in the middle of it.

    So as the idea was to break off the leaders and get into real negotiations, the vice president would be the best to do that. And he did. He kept the process moving. He had a great staff. Bruce Reed, who had been the staff director at the Bowles-Simpson commission, was the vice president's chief of staff, so he was in the room, so he was helping to drive the discussions. So he really knew the issues.

    But the vice president's political antenna is very good, and just his gut about politics is extremely good. So in discussions after the sessions, he'd give you a good sense of whether he thought they were really moving, whether they weren't, what the real feel of the thing was. So he was invaluable for that negotiation.

    So what would he say when he came back into the room about the idea of every time revenues came up?

    Well, revenues, they made a decision early on in that commission -- and this is when it all blew up -- that they would deal with spending cuts and then they'd deal with revenue. And literally, when they finished the spending cuts, at the first mention of revenue, Cantor said, "I'm not coming to the meeting." When Biden, I think, said, "The next meeting" -- I forget the date -- "is revenue," Cantor called up that night -- now, it happened to coincide with the realization that Boehner, the speaker, and the president were doing a deal, and Cantor had not been included in the discussions or negotiations, obviously, by the speaker. We had no obligation to clue him in [as to] what was going on.

    He stepped away, didn't want to go near revenue. And then it all began to unravel, because the speaker was caught in, at least from the political, from the Republican side, caught negotiating, trying to do a deal that may include revenue with the president. And all hell broke loose.

  7. Ψ ShareWhy was Eric Cantor cut out of Boehner's negotiations with the president

    Why so secret? Why was even Cantor cut out?

    Well, that was Boehner's decision, not ours, obviously. It's been proven in Washington: It's very hard to negotiate and try to get a deal done in public. It sounds good to say, "We're going to do this," on C-SPAN, but try to do that in real life, and it's not going to work.

    So I think there was a sense that if the speaker and the president could come to a deal, and they both, as we used to say, hold hands and kind of jump off the ledge together, then they could not ram through, but they surely, with the strength of their positions, would have a very good chance to sell them the package. And I think that's still true.

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    The first big meeting that's talked about between Boehner and the president is on June 23. And after that meeting, the president comes in to brief you and other senior members of the staff. Just give us a feeling for the importance of that meeting, what the mood was after that, and sort of how it was a beginning.

    There was real optimism because the speaker was so vested personally. And knowing that this was dangerous territory for him, to go out in a negotiation with the president and the White House quietly, with an understanding that we're going to come to the table demanding some type of revenue, that he must have made some political calculation that this was doable. He's not a stupid man, by any stretch. And he's a politician.

    The president came back with a strong sense that "Boehner really wants to do this, and I really believe that he wants to do it." You know, it's not every day that the speaker comes to see the president quietly and says, "I'm willing to do a deal," that everybody knows is going to be dangerous for him politically, and probably more dangerous for him than even us at that point, even though the president was getting a lot of growing criticism from the Democratic base of a belief that he had given too much in the negotiations for the continuing resolution and somehow was weak and was ready to roll over to whatever the Republicans wanted.

    Did the White House understand completely at that point the difficulty that Boehner had with his caucus and the fact that he might not be able to get the votes?

    He had made a continuing point through the spring of the difficulties that he had, and specifically around the continuing resolution, just to get those votes. I think there was, I would say in many ways, a miscalculation by me, that I thought that in the end, if the speaker wants and we really, truly get a big deal, that he could ram it through. …

    If you really look at the earlier vote on the CR, he lost a lot of Republicans and passed that budget -- the continuing resolution, which was very favorable to the Republicans as far as spending cuts were concerned, really with Democratic votes that the president put on that.

    In that meeting, the June 23 meeting, maybe this gives an opportunity to [explain] some of the roles that everybody plays. You're there. The president's there. Geithner's there? What's Geithner's role? What's his thinking at that point?

    Geithner believes very strongly that we must get a deal. You cannot let this thing unravel; the markets will react terribly; you'll have a downgrade, possibly. He was trying to hold that off. We were, at the same time, you're in this sort of period where even though there's a date that the debt ceiling will expire, there's all sorts of things that happen, or you can let happen, that extend that. So nobody -- and with additional new revenue that was coming in for some reason, it even pushed it further than we originally thought it would be.

    So there was a lot of tension as far as exactly when this would be, how much time we had. …

  9. Ψ ShareCantor 'has a little bit of edge to him that I guess is an acquired taste'

    Let's talk a little bit about Boehner and Cantor's relationship. I mean, what were they like in these meetings? It's been said that sometimes Cantor would basically cut Boehner's legs off in front of the president.

    There were a couple of meetings, one specifically in the Cabinet Room, that I remember where the speaker -- his style is very quiet. He does not take the lead. He usually makes an opening statement and will occasionally jump in. But it was obviously, on the House side, left to Cantor to carry the water on the specifics in those big meetings. When the president and Boehner got together alone, then Boehner very much would engage more with the president.

    But Cantor was kind of left to be the guy, and he had his notepads, and he was going through numbers and his ideas. Congressman Cantor has a little bit of an edge to him that I guess is an acquired taste, but most of us hadn't acquired it by then. And he had a little edge to him that Boehner does not have, and there were a few times where he seemed to, if not cut off Boehner, disagree with the speaker.

    And then there was a time where he kind of jumped in to correct the president with a tone that was, most of us sitting there in the Cabinet Room thought was a little disrespectful of the president. And the president took great umbrage at his -- kind of slapped him down after that.

    And the effect on the negotiations of the personalities like that.

    I think the effect on the negotiations, first of all, was the fact that Cantor didn't know that Boehner was trying to do a deal with us. So in their internal -- again, I don't pretend to have any great knowledge of the internals of the Republican caucus, but it was pretty obvious that Cantor revolted and his allies revolted when they found out that Boehner was off trying to do a deal. Some people thought it was because Cantor was embarrassed that he wasn't included, and as the majority leader he looked a little out of it. …

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    So getting deeper into this thing now, this is from [New York Times reporter] Matt Bai, and I'd like you to sort of set us straight on what was the truth here. There's an initial offer of $1.5 trillion on the revenue side that comes from the White House to the Republicans early on. There's then a response back from Boehner, which, as the way Matt describes it in his article, is cryptic; on first reading, one didn't quite understand the numbers. But he was using current law, the terminology, which meant that when you really read between the lines, there was an $800 billion amount that he was saying could be gotten from revenues, a surprising number, especially because -- well, you know why. So what's the truth here? There's an initial offer; there's a response. What happens, and what do you guys think of this?

    Well, the $800 billion equates to taking what the president had been saying, tax rates for those at $250 [thousand] and above to the old rates under Bill Clinton. That's the amount that it costs to do that.

    So when Boehner came up with the idea of an $800 billion in revenue over 10 years somehow being gotten was a big statement, because he was basically saying: "I can play in your field around $800 billion. We may not call it a rate increase; it will not be a rate increase. But we may be able to get to that revenue number." That was a major, obviously, with lots of conditions possible around it. But at least he opened the door to that. And that was the only reason there could be negotiations, really, because the president was insisting that rates for 250 and above, which equated to $800 billion, had to happen. …

    Now, we all knew the way he was explaining it, or as people were trying to explain it, that it would be hard to stand there, the president and speaker, and say, "This is tax increases," which we would want to say. And he would try to articulate it, that it really wasn't a tax increase; it may be revenue, but it was really revenue that made for a more growth-oriented economy.

    But he opened the door to the possibility of revenue, which was the basis for serious discussions, all the way to the end, when it actually blew up.

    But if you can comment on the fact that it was even hard --  it didn't say, "And we'll agree to $800 billion." It was cryptically written in language that only somebody by studying it --

    Yeah, but you knew what they were -- we knew -- and from sidebar discussions with the staff, what they were saying, that they could get to the need for revenue. They were acknowledging that revenue had to be part of this. Maybe they wouldn't call it revenue, maybe they sure wouldn't call it a tax rate increase, but that there was going to be a need for additional money, and they were willing to try to figure that out.

    Why did he need to be so cryptic?

    I think partly because he was on his own at this point. So anything leaking at that point, if there was a piece of paper that leaked -- and everybody was scared to death of explaining this stuff on paper, because everyone feared that if it leaked and The Washington Post or New York Times had it on the front page, all hell would break loose.

    And I think he was -- this is my opinion -- that he was very, very worried, because he was out there on his own, without his leadership much less his membership at that point, and wanted to have some plausible deniability if it ever blew up.

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    By July 4 and the weekend afterward, is trust growing? There haven't been leaks. Is the relationship working well? …

    The run-up to that, we felt good, because, two reasons: It hadn't leaked and Boehner was still and his staff was still of the opinion, and were convincing us more and more every day, that these were serious discussions that they wanted to bring to a conclusion. We kept wondering, when are they going to bring in their colleagues? When are they going to --

    Now, during this whole period, you've got Biden and Cantor and a group moving forward on spending cuts and everyone feeling pretty good that that process is working, at least in identifying and trying to put a box around the numbers on some of those spending cuts. And in the discussions between [then-Office of Management and Budget Director] Jack Lew and [congressional affairs liaison] Rob Nabors and Boehner's staff on the Hill an actual framework of a deal, albeit not done and still serious questions to be determined, but at least we had enough on paper and enough in discussion that you could wrap it up in a four-, five-, six-day period.

    The number crunchers could. The politicians was the big if.

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    So on the July 3 meeting, [author Bob] Woodward focuses on it and Matt talks a little about it, was there anything essentially, anything important about that meeting? When you remember that meeting, this is them sitting on the patio --

    What was positive about it was the president felt that Boehner was still intending to do a deal and that he felt good that the wheels hadn't come off, either for him, that, yes, there were some serious issues, and the president was pushing him, but there was not a sort of: "Gee, this thing doesn't smell right. It feels like it's going south on us. He seems to have changed, or he's moving the bar." There was none of that. …

    So it blows up. He walks out. You guys are in the meeting --

    He called. The president was at Camp David, and he called him up at Camp David on I think it was the Saturday night, the following Saturday after, and said it's off. Now, the word had gotten out that he was doing a deal with the president, and I think he got such blowback from Cantor and his caucus that the specter of the speaker losing control of his caucus -- so he shut it down rather quickly.

    Obviously, great disappointment, because we were mere weeks away from a collapse here with the debt ceiling not be extended.

    So it was sort of a week of, on the one hand, how do we get our politics straightened out with our own base in the Senate and the Democrats who did not know we were negotiating, who were then, all hell was breaking loose among a lot of Democrats, a lot of the sort of base of the Democrats, thinking this president's going to sell out because he's quietly trying to do a deal with Boehner. So we had a lot of that political problem going on.

    The elites and obviously the markets were of the opinion of, "Oh, my God, maybe this thing is not going to get done." And I think the speaker had to go back and kind of get control of his caucus and quiet that down.

    I did get a call on, I think it was the Thursday after that, and the speaker's office said, "You and Geithner come up tomorrow to meet." I mean, the following Friday. To be honest with you, I wouldn't say we were overly optimistic about it.

    We got up there, and Cantor was in the room. And that made for a very different sense of, OK, maybe this is serious because Cantor's here -- not that it's not serious with the speaker, but his politics, he was not going it alone again. So this was officially sanctioned by something beyond Speaker Boehner.

    They gave us a piece of paper that was their proposal. And we went back to the president, went back to the staff. The president said: "OK, let's re-engage. Let's see if we can make this work." Jack Lew and Rob Nabors took the lead on the sort of actual proposal. And much of it obviously was the framework of what we had worked on before. And we began a serious discussion.

    They wanted a response from that paper -- it was Friday morning -- they gave us. It was one sheet; it was not a detailed sort of plan, but it had highlights of an agreement. They wanted a response, like, Saturday.

    We were trying to frame a response. They wanted specific cuts identified, and then some amorphous process of getting revenue. Well, that just was not going to work; we needed somehow to surround this revenue issue with specifics without locking it all down, because there had to be a process of tax reform to get to that. And it would take a while.

    Now, the speaker was saying, "This could be done, like, in three weeks." Well, nobody expected congressional committees to work in three weeks, I don't care who the speaker is. So that was unrealistic; we knew it was going to take a certain period. So there was a bit of a --

    So we went around all day Saturday trying to come up with a response. The speaker, I remember calling him, he wanted to get together Saturday. Originally our intent was to get together late Saturday. I think he went up to Pennsylvania for a state party dinner he was speaking at. So I said, "Well, we could meet late." He said, "Well, no, I won't get back till real late." He said, "Let's meet Sunday morning." So I said, "Fine, we'll meet about 11:00," I think it was.

    And so we met in my office, he and Eric Cantor and some of their staff; Tim Geithner, Jack Lew and our team on our side. This was around 11:00. The president had gone to church with his family. I'd told him obviously that the speaker was coming in. The president came in after he returned from church, took Boehner and Cantor down the hall to the Oval Office. And we kind of then just sat around. They probably spent 45 minutes in there, a half hour, 45 minutes.

    Came back, the three of them. The president walked in and said, "I want to get this deal done." And he looked at us and he said, "Get this deal done." And there we went.

    So we met for a little while. The staffs were told to go off and come up with specifics, and we identified the issues of revenue, how do you put a box around it, but at the same time make it more specific and doable, and also make sure that if you identify spending cuts, they don't go into effect until you have actually a real process of revenue and real revenue identified, because the great fear was that we would have that problem of really getting revenue. But it's easy to identify the spending cuts, and we were all in the ballpark of what those cuts were, both on the discretionary side and on the entitlement side.

    And the president, as he had stated often publicly, understands there has to be reform in the entitlement process and was in favor of certain things that a lot of people in the Democratic base were going to be very unhappy with. But the president, both from a substantive sense, thought it was the right thing, because some of these things needed to be controlled, because the costs were just galloping out; and on the other hand, politically, saw that as the right thing to do.

    So that was on Sunday. So everybody kind of went off feeling pretty good. The staff had scheduled meetings Monday morning. We were, I think, charged to get back to them with a statement, with an outline in response to their thing. …

  13. Ψ ShareThe Senate's 'Gang of Six' blows up negotiations

    Through this entire period, starting in January, there was this "Gang of Six" going on, which were Republicans, Democrats in the Senate trying to come up with a deal, a compromise. And for eight months -- seven months, pardon me -- I had been hearing this week they're going to come out with a plan, and they're going to have lots of Republicans and Democrats for it. And then it was next week. Then it was broken down. Then it was over. Then it was going to happen; they're back on track -- on and on and on and on, that they were going on, that this was going to happen.

    It became almost a joke at morning meetings when [National Economic Council Director] Gene Sperling would report what was going on with the Gang of Six. And it got frustrating also, because they had six to try to come to a conclusion, and we were trying to deal with a much broader group, and they couldn't even get to a resolution of six.

    So on Tuesday, after this Sunday meeting, the Gang of Six come out with their brilliant plan after we'd been negotiating, and on Monday moving forward.

    Now, there were still big issues to be decided; I don't mean to imply we had a deal by any stretch. But we were close enough, that serious, sort of in-the-room pounding each other, making compromise, you probably could have gotten that thing where we were on Tuesday morning completed in a day or two. And we knew time was of the essence, because if it began to leak again, we'd be in deep trouble.

    So the Gang of Six comes out with their plan, which had $1.2 trillion in revenue, and they had 36 Republicans sign on board to it in the Senate. Lamar Alexander [R-Tenn], who's like the number two Republican in the Senate or number three, signed on board to it. So we thought it was a good thing, to be very frank -- I think a misjudgment again -- that the Gang of Six had come out with something, more to keep the momentum going of a need to do something than the specifics of what they may propose.

    But their specifics, and then supported by so many Republicans on the revenue side, really created a problem for us and for me, I remember. The Democratic leadership in the Senate didn't think much of our negotiating skills. And I had had my problems with [Senate Majority Leader] Harry Reid [D-Nev.], or Harry Reid had had his problems with me; I never had a problem with him before this. I really had no dealings with him. And they did not think we were very good negotiators, to say the least, and didn't like the idea that they were not involved, intimately involved in the negotiations and discussions with Boehner, and were not being briefed on the specifics on what was going on.

    So I called up Boehner's guy, [his former Chief of Staff Barry] Jackson, and I said, "What the heck's -- what do we do now?" Nobody had done any count on their members. And I remember asking Barry, I said, "Barry, do you have any idea on count, on what this package that we've been talking about now for three or four days, what kind of vote you'd get?" He said, "No, we haven't done any head count; we haven't talked to anybody." And we had not done any, because to do that we'd have to go to Harry Reid and [House Minority Leader] Nancy Pelosi [D-Calif.], and we weren't prepared to do that yet.

    So I said: "Well, lookit, they already think we're idiots down here on negotiating. So they've got 36 Republicans voting for [$1.2 trillion] in revenue, and we're going to settle for $800 billion? They're going to think we're idiots here, OK? So we've got a big problem, OK? We've got to figure out either how to get more revenue with more cuts, or something different here, or let's -- this is a big problem. I think this is a big problem." …

    So then we called -- then the president had Boehner and Cantor down for, I think it was the next day, on Wednesday. … The president pretty well laid out: "Lookit, here's our problem. We can go with this package of $800 billion in revenue and the sort of idea where we're going. Or let's try to figure out if we could go higher with revenue and raise the whole package up."

    As I understand it, the Republicans thought that that was a setup. They always thought we'd go for more revenue. We really had no intention to go for more revenue. If the Gang of Six had not come out that day, we would have been very happy to try to wrap this thing up around $800 billion, because again, that's all the president talked about in raising revenue for the top earners over 250 equated to $800 billion.

    … Was there a knowledge, though, that the numbers that the Gang of Six would be coming out would be higher before it actually happened? Were you surprised when that number came out?

    Well, we had heard so many goofy ideas coming out of the so-called Gang of Six for eight, seven months of, are they really going to come up with something? I mean, I was shocked that they even -- because I had been told at least a half a dozen times in those seven months that it was done, they had a deal; they were moving; they had a big announcement. So when somebody told me that morning the Gang of Six was coming out, I was like, yeah, great, when I grow hair that'll happen, too. And that hasn't happened yet. ...

  14. Ψ Share

    After the Gang of Six happens, you assemble the senior team and you come up with a piece of paper, and basically now you propose the 1.2 incentive across.

    No, I think we kind of had "It's this or that." One package was one with the 1.2. I don't know if we actually sent it up there, or we had it for when Boehner and Cantor came back and basically -- came to a meeting with the president and basically said: "Lookit, we've got two options here, guys. We can go this way" -- and again, we were then at the point where we're starting to think of exactly how many votes could we get. …

    And when Cantor and Boehner were brought down, we had scheduled Sen. Reid and Nancy -- and Minority Leader Pelosi -- to come in shortly thereafter to, for the first time, lay out exactly where we were, and on the entitlement side lay out to them the sort of things the president was willing to do, or at least go toward for a big package, knowing that it was going to be difficult to get Democratic positive response, and knowing that a lot of the people on the Hill leadership thought that the White House negotiating skills were rather limited.

    So at this point, your number is 1.2; it's risen from the 800.

    Well, OK, but we were saying that, but also, when the president met with them, said: "We've got two ways to go, John. Get back to me and tell me which way we're going."

    … From what you know, what happened, and was there any disagreement, it seemed, within the Republican team?

    Well, we always knew that there was a disagreement within the Republican team and that there was a bitterness after the Boehner solo negotiations that Cantor then blew up. …

    All I can say is when they came in for their meeting with the president, I would think the way they acted, that is true, because when they left, I had a sense that something had changed. The speaker had then put on the repeal of Obamacare. Now, to be very frank with you, when he mentioned it, I thought he was joking; I literally thought that he was trying to make some lighthearted comment. And in hindsight, I believe it was in response to the fact that Cantor and others may have told him, "This isn't going to work; it's a setup." And I heard after that Cantor was saying: "See? They throw 1.2. This is all a setup. They want more revenue. They're not really serious about the 800. They BS'ed you." …

  15. Ψ Share'The president was pretty ticked...'

    So July 21 at 10 p.m., the president calls Boehner. He tries again Friday late morning.

    Yeah, he called me. When they left the president said, "Get back to me tonight, John, which way we're going to go here." We briefed Nancy -- pardon me, Minority Leader Pelosi -- and Sen. Reid for the first [time], kind of said: "Here's the deal, guys. We've got A and B here. This door, open up $800 billion in revenue, with these cuts, entitlement cuts. And second door, based off the Gang of Six sort of thing and all these Republicans running around, $1.2 trillion. So we don't know what they're going to come back to us [with]. More likely, they're going to come back with the smaller deal. Nobody really thought they'd come back with $1.2 trillion. So can we sell this?

    My read, both Nancy -- Minority Leader Pelosi -- and Sen. Reid were somewhat taken aback by the forwardness of the president's proposal on entitlements; had some questions, thought it would be difficult, wanted to know how many votes Boehner had. But again, we had no idea, and I don't think he had any idea [about] how many Democrats would be needed.

    In the end, both of them said: "If this is a grand deal, Mr. President, and you think it's right, we're for it. We don't know how many votes we can get, but we'll do our best to get everybody or get as many as we can and get this thing done if you think it's right for the country."

    When they walked out, I remember I turned to him and said, "You know, we may really get this thing done," because that was the big fear, that there would be a revolt among Democrats.

    And then, if you remember, Jack Lew had to go up to the Democratic caucus. And even though there was sort of an acceptability at that meeting, when he went into that caucus, he got murdered by Senate Democrats, almost rudely so. And then all the liberal groups all came together and really beat him up, beat up the White House in this very short window before the thing really fell apart.

    So the president, Boehner, he said, "Get back to me tonight, John." The president didn't hear. I think he called me around 10:00, 10:30 and said, "Have you heard anything?" I said no. I tried to reach the speaker, and I had his cell phone, and he didn't answer, which is very unlike him because he always answered his cell phone. At least my experience was, unless he was off giving a speech, he generally answered his cell phone and got back to me. Did not get back to me. Early the next morning I reported that I hadn't heard back from him yet. So we were, trying to figure out what the hell was going on here. ...

    And then there was a word that the speaker was meeting with McConnell and was going to meet with Reid. And so there was a sense: "Uh-oh, something's going on here, and it ain't good. He has not called the president back, and there's supposed to be a meeting with Reid." Reid's office then confirmed that Boehner wanted a meeting, and so he wanted some idea of what he should be saying, what we knew. And we basically told him what we knew. I think that meeting took place about 1:30 in the afternoon that day. ...

    So my understanding is they met with Sen. Reid or whatever, and they basically at that point had said: "The negotiations are over with the White House. We think we can do a deal up here on the Hill. Let's cut them out; let's move forward."

    I remember I called Barry Jackson -- he was not returning my calls -- who was the chief of staff at the time. I left him a message on his line; I said, "If you guys think you're going to deal without the White House and the president's involvement, you guys are crazier than I thought you were."

    And then late in the day, the speaker called back, and by then everybody knew what was going on. The president was pretty ticked. We were all pretty ticked, thought we had been set up. Thought, first of all, we were much closer to a deal. And somehow I think the Tea Party crowd, the Cantor crowd, whatever you want to -- the division in their caucus were so mad about the thought of a deal and so leery of a deal, for their own purposes, that they concocted this whole thing that we set them up for more revenue. ...

  16. Ψ Share

    So what do we end up with? The final congressional deal, how it kicks it down the road.

    Well, then what happens is, then the Senate, Congress says -- and there's a Peggy Noonan piece, the adults are, no, David Brooks -- the adults are going to take over here, from the White House; the Senate and the House leadership are going to do this. Well, of course, they met and could go nowhere. They got nothing. They then come up with the sort of compromise, the Mitch McConnell idea of a gang, super committee, with an up-or-down vote by Christmas. They originally wanted the debt ceiling put off till Christmas, basically have it again, and have the same hostage-taking situation six months later. And Democrats in the Senate, some of them, were willing to accept that.

    And we were like, "We are not going through this again; this is crazy." We're a little over a year from an election. You're not going to do this and then have to cut another trillion dollars in discretionary spending. This president is not going to accept it. And then you're going to have the collapse of the markets in January of '12, just when there was anticipation at this point that the economy was getting better. You're then going to have a collapse of this thing again in January? Are you crazy? We don't want to go through this again. We're going to figure out a way to go all the way, or this isn't going to work, OK? ...

    So that forced them to then go back to this compromise with a sequester, which we all believed and insisted on that the people, there had to be real pain here. That's why it's 50/50 defense and spending, knowing that the Republicans -- and not just Republicans, but a lot of Democrats who had defense spending in their states, which are jobs, would be very concerned about such a dramatic cut in defense spending. And you had the taxes.

    So let's roll it all together, and we'll have one granddaddy of a fiscal cliff after the election. And that's where that came up with. But even there -- and this is what absolutely confirms to me the difficulty of John Boehner with his caucus -- he almost lost his speakership, if you remember, trying to get that small deal compromise done after they all said, "OK, we have a deal." And the big kids, all the adults in the Senate and the House, had agreed to this, and we were going to do this.

    He had to stall that vote. And for three days there was great suspicion whether he could pass that in the House. Had he not passed that, he would have lost the speakership. And that was the backdrop of all these, the sort of madness. And that confirmed to me, maybe an underestimation on my part of exactly how strong or how weak he was in that caucus for those eight months.

  17. Ψ Share

    So Obama at some point, after the deal is being done, the congressional deal, isn't there a phone call from Obama to Boehner sort of saying, "Hey, isn't there a way to go back?" Just tell me that story.

    It was, I think, on a Sunday night. He was in my office. We were all there, the vice president, everybody was trying to -- and he basically said, "Lookit, John, I don't think this thing is really dead. And I believe we can do this," again, in the framework of the $800 billion framework.

    And Boehner wanted no part of it. My own read was he saw his tenuous situation in his caucus, and, understandably, survival of himself and his position within his caucus was dominant by that point. And he knew that he had to get back in control and could not get back into any negotiations with the White House at that point.

    But he comes out, and he says: "This is a great victory. We got 98 percent of what we wanted."

    Well, that's Washington. They speak in a different way than most normal people. …

  18. Ψ Share

    The election's over. What's changed in your view about the negotiations starting up again?

    Well, first of all, they thought they had a very weakened president in those negotiations. They thought he was being beat up by his team, his supporters, and they thought they just -- they had him.

    Obviously, he got re-elected in a race that none of them thought he was going to win, or very few of them thought he was going to win. And that obviously makes him much stronger.

    Also, he is in a second term, which does free him up to do things that may be bolder. I don't think they're taking advantage of that. I think they're sort of going back to their playbook of last year, and their sort of simplistic "no" is playing right into his hands. I think they're more focused on the negotiations of '11 than I think the president and his team are. And that's to their detriment.


    Because they've shown nothing fresh since the election. The president at least can make the case, "Hey, I've been saying the same thing for nine months." And the American people liked it; at least 51 percent of the people did. John Boehner and the Republicans are back with the same mantra: "This will kill the economy. It's bad for small business." People didn't buy that five weeks ago, whenever the election was.

    So I think they sound stale; they're coming up with nothing different. And they're the ones who have to come up with something different because the president is in the driver's seat, at least with the American people.

    Now, don't get me wrong; if we go off the cliff, everyone suffers, just as people forget, when the government shut down under Bill Clinton, he wasn't real popular with that shutdown. The American people don't like this stuff. They like all of these people to do their job.

    So the president, if we go off the cliff, for those Democrats who think, oh, this will be great for Democrats, they're crazy. He will get hurt, no doubt about it. He's willing to take that hurt because he believes it will, in the end, if we get it right, will be better for the country.

    And the problem of trust, a problem in the past, is that basically the problem here between these two sides?

    No, I don't think it's a personal-trust thing. I think our system -- I mean, I think in the light of day, John Boehner and Barack Obama would trust each other.

    I don't know if the system can handle the size compromise that has to be handled. And that is a compromise that the people who vote for this package will probably, in the dead of night, break into sweats, figuring, "I could lose my election over this vote I just cast," if it's a true compromise.

    And until they get to the point of being willing, many of them, to lose their election, then it's this continuing of: "A compromise is you agree with me, and then we have a compromise." That doesn't seem to be a true compromise. …

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