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Obama Sets Debt Meeting, Opposes Mini Deal

Photographer: Pool

The Obama administration and congressional leaders are working to complete a deal on a long-term budget reduction package by July 22 as part of a plan to raise the $14.3 trillio debt limit. Close

The Obama administration and congressional leaders are working to complete a deal on a... Read More

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Photographer: Pool

The Obama administration and congressional leaders are working to complete a deal on a long-term budget reduction package by July 22 as part of a plan to raise the $14.3 trillio debt limit.

July 5 (Bloomberg) --President Barack Obama said the U.S. has “a unique opportunity to do something big to tackle our deficit,” and that he opposes a short-term measure that would raise the country’s debt limit without addressing more basic fixes to the government’s finances.

“I don’t think the American people sent us here to avoid tough problems,” Obama told reporters at the White House today. “That’s, in fact, what drives them nuts about Washington, when both parties simply take the path of least resistance. And I don’t want to do that here.”

He said in a White House briefing that he asked congressional leaders from both parties to meet on July 7 for talks on the debt.

“It’s my hope that everybody is going to leave their ultimatums at the door, that we’ll all leave our political rhetoric at the door, and that we’re going to do what’s best for our economy and do what’s best for our people,” Obama said. “This should not come down to the last second.”

The president repeated his calls for a “balanced approach” to a deficit solution that includes both spending cuts and revenue increases.

Timeline

The Obama administration and congressional leaders are working to complete a deal on a long-term budget reduction package by July 22 as part of a plan to raise the $14.3 trillion debt limit. The Treasury Department has said that its borrowing authority expires Aug. 2 and could result in a first-ever U.S. default on its obligations.

Obama’s comments came as Democrats were intensifying a showdown with Republicans over whether tax increases should be part of a deficit-cutting deal before the Aug. 2 deadline.

House Speaker John Boehner responded to Obama’s comments by saying Obama’s proposals for new sources of revenue wouldn’t muster enough support to pass Congress.

“I’m happy to discuss these issues at the White House, but such discussions will be fruitless until the president recognizes economic and legislative reality,” Boehner, an Ohio Republican, said in a statement.

Taxes on Rich

Senate Majority Leader Harry Reid has scheduled a vote for later this week to demonstrate support in the Democratic- controlled chamber for raising taxes on Americans who earn $1 million a year or more. His resolution calls on those taxpayers to “make a more meaningful contribution to the deficit- reduction effort.”

The measure is part of a broader Democratic offensive, begun last week, to highlight taxes and tax expenditures benefiting the wealthy in an attempt to turn public opinion against Republicans, who say revenue increases would hurt the economy and shouldn’t be part of any debt deal.

“Democrats are willing to compromise,” Reid, a Nevada Democrat, said on the Senate floor today. “But compromise does not mean allowing our Republican colleagues to put the wants of a few millionaires and billionaires ahead of needs of this nation.”

In a rebuttal to Reid, Senate Minority Leader Mitch McConnell, a Kentucky Republican, said that “in the middle of a jobs crisis,” Democrats “want to raise taxes that we know will kill even more jobs.”

Senator Kelly Ayotte, a New Hampshire Republican, dismissed the Reid resolution as “just a political stunt.”

Corporate Jets

The Democrats and the White House stepped up their push for tax increases when Obama, during a June 29 news conference, accused Republicans of siding with corporate jet owners over assistance for children and the health care for the elderly.

In negotiations led by Vice President Joe Biden that collapsed two weeks ago, the White House had proposed $400 billion in revenue increases, including ending tax breaks for corporate jets and oil and gas companies and phasing out deductions for Americans earning more than $500,000 a year, according to participants, including Maryland Democratic Representative Chris Van Hollen.

Such a strategy gambles on Republicans dropping their objections to tax increases at the risk of a backlash from tax opponents, said Ed Lorenzen, a senior adviser at the Committee for a Responsible Federal Budget, a bipartisan education and policy center in Washington that examines fiscal policy.

“The dangerous part is that everyone seems to be hardening their positions and ramping up their rhetoric,” Lorenzen said before Obama’s remarks today.

Political Rhetoric

“What’s hard to know is whether this rhetoric is posturing to satisfy the base or, more likely, both sides are really just locking themselves in,” Lorenzen said.

The Senate canceled its July 4 recess this week to continue working on a debt-ceiling deal by the Aug. 2 deadline. An agreement will have to be reached by some point between July 15 and July 22 in order to write a bill and comply with congressional rules requiring advance publication before consideration, according to the White House.

There are few signs the two sides have bridged their differences since the Biden effort fell apart. Obama held one meeting with McConnell on June 27, after which neither side reported progress in resolving their differences.

“I think it’s too late,” said Bill Hoagland, a former Republican staff director of the Senate Budget Committee. It’s more likely, he said, that lawmakers will agree to a short-term debt hike coupled with commensurate spending cuts that buys time to complete work on a larger measure when they return from their August recess.

Short-Term Agreement

Doing that is an idea both the White House and Republican House leaders have rejected. Still, some lawmakers have signaled they could accept a short-term deal.

“The big problems aren’t going to go away if you cut a mini-deal -- all it does is delay the moment of truth,” Senator John Cornyn, a Texas Republican, said July 3 on “Fox News Sunday.” “If we can’t, then we’ll take the savings we can get now and we will re-litigate this as we get closer to the election.”

McConnell, in his floor speech, renewed his call for Obama to come to Capitol Hill to meet with Republicans on the debt ceiling -- an invitation the White House initially rejected last week. Obama’s spokesman, Jay Carney, said Republicans simply wanted to “restate their maximalist position.”

To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Heidi Przybyla in Washington at mdorning@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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