By JACKIE CALMES and CARL HULSE
Negotiations over a broad deficit reduction plan collapsed in acrimony on Friday after Speaker John A. Boehner suddenly broke off talks with President Obama, raising the risk of an economy-shaking default.
The latest turn in the summer’s epic clash between the White House and Congressional Republicans came little more than a week before the government hits its borrowing ceiling, and set off accusations from both sides about who was to blame.
A visibly angry President Obama, in a hastily scheduled White House news conference, demanded that Congressional leaders come to the White House on Saturday morning. “I want them here at 11 a.m. tomorrow,” he said. “They are going to have to explain to me how it is that we are going to avoid default.”
Mr. Obama said Mr. Boehner had stopped returning his calls when it became clear that rank-and-file House Republicans would not agree to raise revenues on wealthy Americans as part of a debt-reduction deal, despite Mr. Obama’s concessions on reducing future spending for Medicare, Medicaid and Social Security. Both sides have sought a deficit-reduction agreement as part of the essential vote to raise the government’s $14.3 trillion debt limit, which will be reached Aug. 2.
In a letter to his Republican colleagues on Friday night, Mr. Boehner said, “A deal was never reached, and was never really close.” He added: “In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.”
The speaker said Mr. Obama wanted to raise taxes too high and would not make “fundamental changes” to entitlement benefit programs like Medicare.
But according to a White House official, Mr. Obama had agreed over the coming decade to cut $250 billion from Medicare spending and $310 billion from other domestic entitlement programs, like farm subsidies and education programs. And Mr. Obama was willing to change the formula for Social Security cost-of living adjustments, which many economists say would more accurately reflect inflation, for savings of about $125 billion more.
All of Mr. Obama’s concessions on the benefit programs were contingent, however, on Mr. Boehner and Republicans agreeing to higher taxes for wealthy individuals and corporations.
At the news conference, Mr. Obama said Republicans were forfeiting an “extraordinarily fair deal” to trim the deficit and raise the debt ceiling. “I have gone out of my way to make compromises,” the president added.
“Essentially what we had offered Speaker Boehner was over a trillion dollars in cuts to discretionary spending, both domestic and defense,” Mr. Obama said. “We then offered an additional $650 billion in cuts to entitlement programs Medicare, Medicaid, Social Security. We believed that it was possible to shape those in a way that preserved the integrity of the system, made them available for the next generation and did not affect current beneficiaries in an adverse way.”
Republicans, though, said that the White House pushed for more revenue midway through the talks. “The White House moved the goal posts,” Mr. Boehner said in a news conference.
The breakdown was the second time this month that Mr. Boehner had walked away from the table with Mr. Obama after word of their private talks was leaked to the news media, provoking protests from Republican lawmakers and antitax conservative groups.
“I’ve been left at the altar now a couple of times,” Mr. Obama said. “And I think that one of the questions that the Republican Party is going to have to ask itself is, Can they say yes to anything?”
This time, however, Mr. Obama had also faced a firestorm from within his party, because of the spending cuts he was considering with Mr. Boehner.
Hours before the tempest, the three top stewards of the nation’s financial system — Treasury Secretary Timothy F. Geithner; Ben S. Bernanke, chairman of the Federal Reserve, and William C. Dudley, president of the Federal Reserve Bank of New York — had met to discuss how to react to shield the economy from the blow if Congress failed to raise the debt limit. But in a joint statement, they said they remained confident Congress would act.
Mr. Obama, too, said he thought that default could be avoided. “I am less confident at this point that people are willing to step up to the plate and actually deal with the underlying problem of debt and deficits,” he said at his news conference.
Mr. Boehner said he would work now with Senate leaders on a plan to raise the debt limit.
Just what form the new legislative proposal will take was uncertain, as lawmakers and their top aides had only opened talks about how to proceed. Some expected it to be built upon an earlier plan by Senator Mitch McConnell of Kentucky, the Republican leader, who employed an arcane process to allow a debt limit increase to occur over the objections of Congress.
But in a statement, Mr. McConnell noted that the speaker had expressed an interest in trying to find a “new path forward” with Senate Democrats, suggesting that he wanted to go in a different direction than the McConnell plan, which had drawn stiff opposition in the House. It could still provide a last-ditch alternative if all else fails.
Even before the day’s events, deep pessimism had settled over Washington as the two main alternatives to an Obama-Boehner proposal were either defeated or shelved. First, Mr. McConnell shelved the approach he was working on with Senator Harry Reid of Nevada, the Democratic majority leader, amid growing resistance in both parties.
And as expected, the Democratic-controlled Senate voted down a measure that House Republicans approved earlier in the week that would force the government to shrink to the smallest level in many decades. Many House Republicans have said they would not approve an increase in the debt limit without the “cut, cap and balance” package becoming law, too.
Republican officials said the talks between the administration and the speaker had produced consensus on some major issues.
But they said the negotiations were complicated by this week’s release of a separate deficit-cutting plan by a bipartisan Senate group, the so-called Gang of Six, that proposed more tax revenues than agreed upon by Republicans and the White House. The officials, speaking on background, said that this development led Mr. Obama to push for additional revenues as well, and the differences could not be bridged.
Democrats said that, to their chagrin, Mr. Obama pushed for more entitlement savings than even the Gang of Six supported.
Earlier Friday, in a public event at the University of Maryland, in College Park, Mr. Obama for the first time addressed, and ruled out, the idea that in an emergency the Constitution would empower him to raise the debt limit to prevent default and, as he put it, “basically ignore” the federal law requiring that the debt ceiling be set by statute.
The argument of “the constitutional option,” which President Bill Clinton, like Mr. Obama a former constitutional law instructor, endorsed this week, is based on the Fourteenth Amendment’s provision that the validity of the United States debt “shall not be questioned.” “I have talked to my lawyers,” Mr. Obama said, and “they are not persuaded that that is a winning argument.”
But with the Aug. 2 deadline now looming, lawmakers were bracing for the worst in what Senator Mark Pryor called a “cliff-hanger moment.”
“The unthinkable could happen,” said Mr. Pryor, an Arkansas Democrat. “The 80 million bills the federal government pays could come to a screeching halt.
“That means millions of seniors may not receive their Social Security checks in the mail. Troops may not receive paychecks.”
“Americans and leaders all over the world are now watching,” he added. “The question for Congress remains: Will we rise to the occasion, or will we fail?”
As we watch the discussions in Washington clearly self serving ideologies are on display. Anytime people try to adhere to rigid positions such as I “never will I raise taxes” which is a pledge many have made, its only a question of time till that bubble bursts.
Its kind of funny to see many politicians who reject any compromise also reject any real impact of the debt ceiling not being raised. Since this will be the first time in the nations history for anything like this to happen what actually will result remains in large part unknown. However even simple common sense tells a person when bills are not paid there are repercussions. A persons/countries credit worthiness changes.
If the average voter knew about the possible ramifications of what default may do would they support moving into default?
I have a friend who regards compromise as retreating. From the looks of it many current politicians also do. Holding onto anything in a rigid fashion is one of, if not the quickest way, to invite change.
Any human system that is created, when it increasingly is controlled by intensely ego driven people, the system/institution will crumble. Are we not seeing this across the globe? Also are we not an intensely ego driven/external race? Why would anything going on in the world currently be of any surprise?