Reid-McConnell Debt Talks Clouded by Past Deal Missteps

The drive to avert a U.S. default hinges on talks between two top Senate leaders who have a mixed record of brokering 11th-hour agreements and find themselves increasingly at partisan loggerheads.

Senate Majority Leader Harry Reid, a Nevada Democrat, and Senate Republican Leader Mitch McConnell of Kentucky continued talks today on a deal to reopen the government and raise the debt ceiling before Oct. 17. Reid said the two are “closer” to an agreement though they haven’t reached one yet.

The two lawmakers negotiated a last-minute end to 2011’s debt-limit fight and helped revive the 2008 financial bailout after the House rejected it.

At times, however, others had to step in to complete the deal. McConnell worked with Vice President Joe Biden to close a 2012 agreement that preserved most of the George W. Bush-era tax cuts. During a fight this year over presidential appointments, McConnell said Reid might well “be remembered as the worst leader of the Senate ever” if he changed long-standing Senate rules. Reid didn’t.

“Both these guys know how to cut deals, but I don’t see it right now -- no,” said Jim Manley, a former top aide to Reid.

As Senate leaders negotiated, the White House postponed a planned afternoon meeting between President Barack Obama, Reid, McConnell, House Speaker John Boehner and House Minority Leader Nancy Pelosi. The delay would “allow leaders in the Senate time to continue making important progress,” according to a White House statement.

2014 Politics

The latest round of talks is complicated by Republicans’ goal of winning the Senate majority in 2014. Democrats now control the chamber with 54 seats, including two independents who caucus with the party.

Reid must seek a deal that satisfies his rank and file, while also protecting the interests of incumbent senators on the ballot from Republican-leaning states including Arkansas, Louisiana and North Carolina.

Another complication is McConnell’s re-election contest next year. He has a Tea Party-backed Republican primary challenger, and a local Tea Party group last week pulled its support for the minority leader.

His general-election opponent would be Kentucky Democratic Secretary of State Alison Grimes, who has dubbed McConnell “Senator Gridlock.” McConnell’s increasingly public role in the efforts to end the fiscal impasse would help burnish his general-election credentials as a deal maker.

Nominations Clash

McConnell and Reid have spent this year clashing over Obama’s second-term nominees, spending priorities, reports the Internal Revenue Service gave extra scrutiny to small-government groups and over tighter gun restrictions after the shootings in Newtown, Connecticut.

Some disputes were acrimonious enough that other senators had to step in to resolve them.

Last July, amid the showdown over stalled presidential nominees, Republican Senator John McCain of Arizona after a three-hour closed-door session was credited with helping to reach the outlines of a deal. It ended a threat by Reid to strip Republicans of their power to block a president’s picks.

McConnell for weeks vowed to halt all Senate work in retaliation, at one point saying on the Senate floor that if Reid proceeded with a permanent change to filibuster rules he would “be remembered as the worst leader of the Senate ever.”

Ultimately, 12 senators including McCain voted to help usher through the first nominee -- Richard Cordray to lead the Consumer Financial Protection Bureau -- and then other presidential nominees followed as the crisis was averted.

Bailout Legislation

Over the longer term, Reid and McConnell’s ability to work together has led to a series of legislative breakthroughs, including the 2008 bailout of Wall Street, which both supported.

After the rescue legislation failed in the House in September 2008 and financial markets tanked, McConnell and Reid went on television to promise they’d ensure passage. They came up with package of $110 billion in tax breaks and other items, including disaster aid, to help win support.

In 2010, during a post-election congressional session, the two struck deals to usher through big-ticket measures. McConnell helped reach a deal with Obama -- which Reid agreed not to block -- that extended the Bush-era tax cuts for all income levels as part of an extension of jobless benefits the administration wanted.

Arms Treaty

Reid was able to schedule votes on a repeal of the military’s ban on openly gay service members and an arms treaty with Russia, overcoming opposition from McConnell and most Senate Republicans.

The bargain that led to the 2011 debt-limit increase was carefully crafted by both, with benefits to their parties: It shielded Republicans from blame for raising the borrowing cap and included wording on spending limits that Democrats wanted.

The compromise measure passed by both chambers in August of that year raised the debt ceiling enough to fund government borrowing until 2013 while cutting $2.4 trillion in spending over a decade.

The legislation included a unique approach hatched by McConnell that allowed three increases in the debt limit to be passed in Congress without Republicans having to directly support it. The measure also specified $917 billion in discretionary spending cuts over 10 years, including firm agreement on overall spending levels for two years, something Reid pushed for at the time with an eye to abating some of the tensions over appropriations.

Personal Relationship

Reid, 73, and McConnell, 71, bristle at each other though they’ve cultivated a friendship built on mutual respect. Even with their ideological differences, the two share an affinity for the Senate as an institution. One sign of a cordial relationship is their refusal to campaign against one another.

Reid on Oct. 12 said their relationship through almost seven years in the Senate’s most influential positions was forged in part by earlier tenures where each served in their party’s role as the No. 2 leader -- the vote-counting whip.

“Senator McConnell and I have been in this body a long time,” Reid said. “We have done things for a long time together. I know him. He knows me. We don’t agree on everything. That, as you know, is probably an understatement. But we were whips together a long time ago. We have fond memories of our days together when others could take the responsibility we now have to take.”

‘Intense Pressure’

If the two reach an agreement, it would be up to Boehner to get it through the House. A lack of a deal probably won’t tarnish the reputations of the two Senate leaders as much as it would affect Boehner, whose party took the hard line that forced the matter, said Stan Collender, a former congressional budget aide.

“Boehner is still the one who should be feeling the intense pressure,” said Collender, managing director of Qorvis Communications LLC. “It will be up to him to get his caucus to go along if Reid and McConnell agree to something. And he and the House GOP will be blamed if Reid and McConnell don’t.”

Over the past few years, “McConnell and Reid have been successful in negotiating an escape hatch,” said Ron Bonjean, a one-time top aide to former Senate Majority Leader Trent Lott and Republican House Speaker Dennis Hastert. “But this time it’s unclear how the House Republicans would view this -- whether they would view it as a surrender.”

Senator Bob Corker, a Tennessee Republican, said if there’s any solution to this looming default crisis, it will be up to the leaders to once again produce a last-minute solution for all sides. McConnell, he insisted, has latitude in striking a deal because he can count on unity within Republican ranks.

“I do think that this is going to hinge on them sitting down and coming to a conclusion,” Corker said.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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