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What Were They Thinking?

John Boehner; drawing by John Springs

Finding a solution to reducing the deficit that was agreeable to Boehner, to Cantor, to former Speaker Nancy Pelosi, to Senate Minority Leader Mitch McConnell, and to the President was no small task. The men, who had rudely and unwisely excluded Pelosi, now the minority leader, from their deliberations, could no longer avoid dealing with her. They’d considered Pelosi a bit of a pain, insistent as she was on standing up for liberal principles.

Boehner and Cantor, and also Boehner and McConnell, have had their political differences and conflicting political exigencies. Boehner of course wants to retain Republican control of the House—it’s not inconceivable that the Democrats could pick up the necessary twenty-four seats to recover it. Therefore, Boehner didn’t want his flock to have to cast a controversial vote anytime close to the election. On the other hand, with twenty-three Democratic senators up for reelection, McConnell has had his eye on a Republican takeover of the Senate. His party would need to pick up only four seats. Therefore, he was looking for a way to force a controversial vote closer to the election.

In early July, when Obama suddenly injected Medicare, Social Security, and Medicaid into the deficit and debt negotiations, many, perhaps most, Democrats were dismayed. They believed that the President was offering up the poor and the needy as a negotiating gambit. (His position was that if the Republicans would give on taxes, he’d give on entitlements.) A bewildered Pelosi said after that meeting, “He calls this a Grand Bargain?” And she came down firmly against any changes in those programs that would hurt beneficiaries.

Moreover, the Democrats had their own political reasons for opposing reductions in Medicare benefits. They had had great success in campaigning against Paul Ryan’s bizarre proposal, adopted by the House (despite even Boehner’s expressed misgivings), that would turn Medicare into a voucher system. According to Ryan’s plan the government would give future eligible Medicare recipients $6,000 and let them shop for private insurance. (Good luck.)

Having made Ryan’s proposal the centerpiece of the campaign, the Democrats had recently won a special election in a New York district that had been held by the Republicans since the 1950s. The Democrats believed they were onto a good thing.

The question arises, aside from Obama’s chronically allowing the Republicans to define the agenda and even the terminology (the pejorative word “Obamacare” is now even used by news broadcasters), why did he so definitively place himself on the side of the deficit reducers at a time when growth and job creation were by far the country’s most urgent needs?

It all goes back to the “shellacking” Obama took in the 2010 elections. The President’s political advisers studied the numbers and concluded that the voters wanted the government to spend less. This was an arguable interpretation. Nevertheless, the political advisers believed that elections are decided by middle-of-the-road independent voters, and this group became the target for determining the policies of the next two years.

That explains a lot about the course the President has been taking this year. The political team’s reading of these voters was that to them, a dollar spent by government to create a job is a dollar wasted. The only thing that carries weight with such swing voters, they decided—in another arguable proposition—is cutting spending. Moreover, like Democrats—and very unlike Republicans—these voters do not consider “compromise” a dirty word.

The President proposed at least two modest plans for stimulus spending, someone familiar with all these deliberations told me, “but he’s not as Keynesian as before.” This person said, “If the political advisers had told him in 2009 that the median voter didn’t like the stimulus, he’d have told them to get lost.” By 2011, in his State of the Union address in January he moved from jobs creation (such as the stimulus program) toward longer-term investment.

The speech Obama gave on April 13 marked his conversion to fiscal centrism; to being the fiscally responsible Democrat. In that speech he stated that he wanted to reduce the debt by $4 trillion—thus aligning himself with the Republicans—but also asked for revenues to partly offset that reduction. It was all about reelection politics, designed to appeal to this same group of independents. “And that’s why,” I was told by the person familiar with the White House deliberations, “he went bigger in the deficit reduction talks; bringing in Social Security is consistent with that slice of the electorate they’re trying to reach.” This person said, “There’s a bit of bass-ackwardness to this; the deficit spending you’d want to focus on right now is the jobs issue.”

This all fits with another development in the Obama White House. According to another close observer, David Plouffe, the manager of Obama’s 2008 presidential campaign, who officially joined the White House staff in January 2011, has taken over. “Everything is about the reelect,” this observer says—“where the President goes, what he does.”

Plouffe’s advice to the President defines not just Obama’s policies but also his behavior. Plouffe tells the President, according to this observer, that the target group wants him to seem the most reasonable man in the room. Plouffe is the conceptualizer, and Bill Daley, the chief of staff who shares Plouffe’s political outlook, makes things happen; Gene Sperling, the director of economic policy, and Tom Donilon, the national security adviser, are smart men but they come out of politics rather than academia or deep experience in their respective fields. Once Austan Goolsbee, chairman of the Council of Economic Advisers, departs later this summer, all of the President’s original economic advisers will be gone. Partly this is because the President’s emphasis on budget cutting didn’t leave them very much to do. One White House émigré told me, “It’s not a place that welcomes ideas.”

Because of the extent to which the President had allowed the Republicans to set the terms of the debate, the attitude of numerous congressional Democrats toward him became increasingly sour, even disrespectful. After Obama introduced popular entitlement programs into the budget fight, a Democratic senator described the attitude of a number of his colleagues as:

Resigned disgust at the White House: there they go again. “Mr. Halfway” keeps getting maneuvered around as Republicans move the goalposts on him.

According to a report in The Hill newspaper in late June, the tough-minded, experienced, and blunt Democratic Representative Henry Waxman of California told Obama in a White House meeting that he’d asked several Republicans about their meeting with him the day before, and, “To a person, they said the President’s going to cave.” Then the congressman said to the President of the United States, “And if you’re going to cave, tell us right now.” The President was reported to have been displeased, and responded, “I’m the President of the United States; my words carry weight.”

Much discussion went on about whether the result of the negotiations would be a “big” deal, reducing the debt by $4 trillion, with $1 trillion coming from revenues and some sort of savings from entitlement programs, as the President and Boehner had privately discussed—although Boehner’s dream of a bipartisan deal was dashed by Cantor on behalf of numerous other House Republicans—or a “small” deal, cutting the debt by about $2 trillion. It was easy to lose sight of the fact that the President was using a lot of his time and energy (he looked very tired) on the wrong subject. And that was even before the arduous, almost daily meetings with the two parties’ leaders.

With the negotiations stalled and time running out, McConnell, worried that the President had manuevered his party into a position where if there were a default the Republicans would be blamed, introduced his own proposal to break the impasse. The very shrewd McConnell warned his Senate colleagues that if they did not take this way out of the impasse, the party’s “brand would be badly damaged.” McConnell’s proposal handed over to the President the authority to raise the debt ceiling, which his own party had been trying so hard to exploit and never dreamed it would surrender to the President.

Under McConnell’s plan, the President would raise the debt ceiling three times for a total of $2.4 trillion before the November election. Each time, Congress would vote on a resolution of disapproval. The proposals Obama could offer would consist of spending cuts only, in keeping with the Republicans’ position that there would be no savings from the tax code. Thus McConnell had maneuvered the Democrats into having to cast three votes on the debt limit. He said that a major goal of his plan was to “reassure the markets that default is not an option.”

McConnell persuaded Harry Reid, the Democratic Senate leader, to cosponsor his proposal, incorporating Reid’s idea of setting up a bipartisan commission of members of the House and Senate who would draw up new budget proposals that would then go to both houses and be considered under a special procedure that would allow no filibuster and no amendments.

The new proposal also contained $1.5 trillion in budget cuts that had been agreed to by a bipartisan group of Senators presided over by Vice President Biden. These were the only cuts that the two parties could agree on, guaranteeing that the cuts would be much more painful for the Democrats.

With two weeks remaining before the day of default, McConnell and Reid were negotiating the fine points of their proposal, and Boehner had made a quiet overture for Nancy Pelosi’s support. (Pelosi had told people that she would demand future protection for Medicare and Social Security.) Some House Republicans expressed opposition to the Senate leadership’s plan. At the same time some conservative members were urging that Congress allow a default, saying that they didn’t believe the results would be as dire as the administration was warning. And then, suddenly, on July 19 the so-called Gang of Six, a bipartisan group of senators led by Democrat Kent Conrad, rode into town with a plan about the size of the one Obama and Boehner had been considering.

The plan envisaged cutting $3.7 trillion from the debt, but the details were vague, and it seemed very unlikely that such a complex plan—offered in the form of a four-page outline—with legislation involving several committees, could be drafted and passed by the Senate and the House within two weeks. The group had been holding back its plan at the White House’s request, but became impatient and fearful that Obama would cave again. The President said he liked the new plan though he had to know there was plenty in it for others to object to. It called for, to begin with, both tax revenues and deep cuts in entitlement programs. Substantial tension was growing in Washington, but to some extent it seemed a phony tension. McConnell and Boehner had vowed there would be no default. Now it was up to them and others to work out what to do instead.

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