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07.21.11

Budget Deal Still Elusive

The White House and John Boehner are close to an agreement that would overhaul taxes down the road. But Democrats are balking, Patricia Murphy reports.

President Obama and John Boehner have inched closer to the grand budgetary bargain that has eluded them as a way to resolve the debt crisis. But many Democrats are rebelling.

In fact, some Democrats were livid in a closed-door meeting Thursday with Budget Director Jacob Lew, both at being cut out of the action and at the news that the purported agreement would include no immediate tax increases. One source quoted Senate Majority Leader Harry Reid as telling Lew, “No revenue, no deal.”

The White House alerted top members of Congress Wednesday night that they could soon reach an agreement with Republican leaders to raise the nation’s debt ceiling and avoid an Aug. 2 default. According to congressional sources briefed on the White House conversations, the potential deal, which was not discussed in detail, would slice more than $3 trillion from the federal budget over the next 10 years, including cuts to key entitlement programs like Medicare.

Along with these reductions, Congress would take up legislation by 2012 to overhaul the federal tax code by lowering tax rates, but also ending certain tax subsidies and closing some tax loopholes. Several existing budget proposals estimate that reforms to the tax code would raise up to $1 trillion in revenue over a decade.

House Democrats were not pleased. Steny Hoyer, the minority whip, said, “We need revenues if we’re going to do a deal.”

Rep. John Larson, a Connecticut Democrat, said, “Cuts to Medicare, Social Security, and Medicaid are nonstarters on our side, and that hasn't changed as far as I know.”

Obama and Boehner agreed to a so-called grand bargain of $4 trillion two weeks ago, but the House speaker quickly backed off after his GOP caucus revolted. The thinking behind the latest version is that it would pass largely with Republican votes, but the administration would still need significant Democratic support in the Senate.

When The New York Times reported on the possible agreement Thursday afternoon, the White House and Republican negotiators moved swiftly to deny that any deal had been reached. 

Democrats are worried that any cuts to Medicare would neuter what they believe is their most powerful campaign issue going into the 2012 elections.

“There is no deal,” said White House Press Secretary Jay Carney.  “We are not close to a deal.”

“False,” House Speaker John Boehner tweeted in response to the Times story.

If the reported framework moves forward, Democratic staffers are concerned that separating the budget cuts and eventual tax code overhaul could mean an overreliance on slashing federal programs to cut the deficit, rather than increasing taxes on wealthy individuals and corporations.

Democrats are also worried that any cuts to Medicare would neuter what they believe is their most powerful campaign issue going into the 2012 elections. Nancy Pelosi and some of her colleagues have been hammering Republicans in recent months over their willingness to turn Medicare into a voucher program, as in the budget plan assembled by Rep. Paul Ryan and approved by the House.

Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, said Thursday that he is not aware of any specific agreement between the White House and Boehner, but that progress is being made.

“There has been a meeting of the minds, at least for now, to try and get a grand bargain, a big deal,” Van Hollen said.  “Those conversations are real.  Whether they’re anywhere near the end, I don’t know.”