Boehner Abandons Grand Bargain, Can't Sway Caucus on Taxes

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JONATHAN COHN JULY 10, 2011

Boehner Abandons Grand Bargain, Can't Sway Caucus on Taxes

Does anything matter to Republicans more than protecting tax cuts for the very wealthy? Developments of the last 18 hours suggest very strongly that the answer is no.

As you have probably heard by now, House Speaker John Boehner on Saturday evening informed President Obama that he was no longer interested in pursuing a “grand bargain” on deficit reduction. It was a major turning point in the debate. For the past week, Obama has made clear that he hoped to use ongoing negotiations over the debt ceiling to put in place a massive, potentially historic deal to reorder the nation’s spending priorities – a deal that would reduce deficits by as much as $4 trillion cumulatively over the next decade. 

Boehner indicated that he shared that goal. And the deal, if completed, was likely to reflect Republican priorities far more than Democratic ones. Although Obama has insisted he wants a “balanced” approach to reducing the deficit, the deal was likely to involve far more in spending reductions than in new revenue.

To achieve this deal, Democrats had indicated a significant and serious willingness to sacrifice their own goals and their own constituencies. Reductions in Medicare, Medicaid, and Social Security were all on the table – not to mention reductions in discretionary spending that would have seriously weakened, if not crippled, government programs on which poor people, in particular, depend. President Obama had made it clear he was willing to accept such cuts, if it meant putting together a far-reaching package. More liberal Democrats were more skeptical, but rhetoric from House Minority Leader Nancy Pelosi, among others, made it clear they were willing to entertain most of these ideas, depending on their structure and what Republicans were offering in return. 

But that last part proved to be the problem. Such a large deal would have required Republicans to agree to new revenue, in some form. And at least some of that money would have come from higher taxes (in terms of total collections, if not rates) on the very wealthy. Boehner hinted that might be acceptable, as part of a compromise. New York Times columnist David Brooks urged Republicans to go along, calling the still-lopsided proposal "the deal of the century." 

But other Republican leaders, like Majority Leader Eric Cantor, and certain conservative agitators, like the writers of the Wall Street Journal editorial page, made very clear they disagreed. No matter how big the Democratic concessions, no matter how risky the prospect of postponing a deal on the debt ceiling, they were not willing to embrace a package that meant higher taxes, particularly taxes on the wealthy. And according to reports in this morning’s papers, those voices finally prevailed.

Here’s Politico’s account, by David Rogers and Jake Sherman: 

Tax policy disputes were at the center of the collapse, including differences with the White House over President Barack Obama’s demand that future tax reforms must maintain or increase the progressivity of the tax code. But for days Boehner has been under relentless pressure from conservatives to step away from the deal, which Saturday’s Wall Street Journal editorial writers dubbed “Boehner’s Obama Gamble.”

Boehner had effectively agreed to decouple the high-end tax rates of the Bush era from the middle and lower income rates favored by Democrats. But before anything changed in 2013, he was promised enactment of broad reform — covering personal and corporate taxes — with the goal of lowering rates by establishing a more efficient code. …

Nonetheless, it was a tall order given the assumption that the deal would also yield close to $1 trillion in new revenues over 10 years. Ending oil and gas tax breaks, as well as the favorable “carried interest” capital gains rates used to shelter investor income, would be part of the picture. But reform also would have to contribute its share of new revenues.

That passage in italics (mine) is really important. Assuming the account is correct — and David Rogers usually knows what he's talking about — the deal would have extended Bush tax cuts that apply to lower and middle incomes. But the deal wouldn't have extended the tax cuts that apply to higher incomes, at least right away. And that was more than the Republicans were willing to contemplate. 

In case there's any doubt about the GOP's priorities, here’s the Washington Post’s account, written by Lori Montgomery and Paul Kane: 

The sweeping deal Obama and Boehner had been discussing would have required both parties to take a bold leap into the political abyss. Democrats were demanding more than $800 billion in new tax revenue, causing heartburn among the hard-line fiscal conservatives who dominate the House Republican caucus. Republicans, meanwhile, were demanding sharp cuts to Medicare and Social Security, popular safety net programs that congressional Democrats have vowed to protect.

Obama, at least, was willing to make that leap and had put significant reductions to entitlement programs on the table. But on Saturday, Boehner blinked: Republican aides said he could not, in the end, reach agreement with the White House on a strategy to permit the Bush-era tax cuts for the nation’s wealthiest households to expire next year, as lawmakers undertook a thorough rewrite of the tax code.

I can't say I'm entirely disappointed to see the prospects of the grand bargain diminish. (I say "diminish" because Obama apparently hasn't given up.) The likely terms of the deal seemed way too skewed in the conservative direction for my taste.

For what it's worth, I’ve actually gained some respect for Boehner. Based on the reports and what I've heard from people close to the negotiations, Boehner was genuinely interested in negotiating a deal even if that meant agreeing to some compromises, albeit pretty modest ones from my perspective. 

But as the skeptics, like my colleague Jonathan Chait, were predicting all along, Boehner isn't really in charge of the House Republican caucus. The lunatics are. And it looks like they've won.

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posted in: jonathan cohn, politics, new york times, wall street journal, barack obama, david brooks, david rogers, john boehner, nancy pelosi, medicare, republican party, white house

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