The White House is eyeing a return to the “grand bargain” it tried to reach late last year with House Speaker John A. Boehner (R-Ohio) as perhaps the best hope of defusing a fresh threat to the U.S. economy in just two months, according to people familiar with the discussions.
As planning begins for the next phase of Washington’s fiscal wars, attention is turning to a strategy for avoiding deep automatic cuts to domestic and defense spending and averting a government default — which could all hit at the same moment.
Democratic and Republican officials say they could build on the “grand bargain” talks, which looked at raising new revenue through an overhaul of the tax code and reducing spending, including on Medicare, Social Security and other entitlement programs.
As in the earlier negotiations, however, there remain sticking points. How much new tax revenue would Republicans accept, especially now that tax rates on the wealthy are already climbing under the “fiscal cliff” agreement, and how far will President Obama go in meeting the GOP demand for deep spending cuts?
Obama and Boehner came tantalizingly close to a broad deal last month aimed at stabilizing the federal debt before the speaker abandoned the talks, saying that the White House offer was too heavy on taxes and too light on spending cuts. Instead, Democrats and Republicans reached a far more modest agreement to avoid the fiscal cliff.
Republicans say they have a stronger hand in future negotiations because of the federal government’s pressing need to increase its $16-4 trillion borrowing limit. The government hit the debt ceiling this week, and the Treasury Department warns it will be unable to pay its bills in about two months unless it can borrow more. Congressional Republicans say they will not vote to raise the debt ceiling unless there is a deal to make steep spending cuts.
White House officials insist that the government must meet its obligations and thus raising the debt ceiling is non-negotiable. Some Democrats, however, say that the bargaining advantage has shifted toward the GOP.
White House officials still believe that the framework previously discussed by Obama and Boehner offers ample scope for a deal to avoid the automatic spending cuts, known as a sequester, according to people familiar with the discussions. Such an agreement, they say, could yield legislation that would also raise the debt ceiling.
Privately, some Republicans are not opposed to the approach. The GOP is “generally open to the framework, but the devil is in the details,” said one Republican leadership aide. The aide noted that Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, already plans to seek tax-code reform this year.
Still, the GOP plans to press its case that the time to discuss increasing taxes is over and the focus now must be on cutting spending. At a closed-door meeting Friday, Boehner told House Republicans that any increase in the debt limit must be accompanied by spending cuts and reforms of a greater amount, according to a person in the room.
