Speaker of the House John Boehner announced Saturday evening that he would no longer be negotiating a “grand bargain” on the debt limit with President Obama and the Democrats.
The “grand bargain” under discussion since Wednesday would have reduced federal deficits by $4 trillion over 10 years by cutting spending, reforming Social Security, Medicare and Medicaid, and raising $1 trillion by eliminating tax deductions, increasing government fees, and selling property owned by the federal government.
Boehner said a deal could not be reached because Democrats are insisting that tax increases are part of the compromise while Republicans will not agree to any tax increases.
“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase,” Boehner said.
The announcement resets the agenda for the noon meeting Sunday at the White House between President Obama and congressional leaders. Now, the negotiations will likely focus on a much smaller agreement, around $2 trillion, that will cut spending without making any changes to Medicare, Medicaid, Social Security, or the tax code. The smaller settlement would also mean that the debt ceiling would need to be raised again in 2012 or 2013.
A “grand bargain” on the debt ceiling that included tax reform and entitlement reform proved too difficult for Obama and Boehner to sell to their respective parties.
After the announcement on Wednesday, some liberal Democrats said that they would not support any deal that reduced the rate of growth in benefits for Social Security, Medicare and Medicaid beneficiaries. Some Republicans, especially those affiliated with the Tea Party Movement, said they would not support a deal that raised taxes, even if those tax increases came from eliminating deductions rather than raising rates.
In a speech on Wednesday, Boehner gave the “grand bargain” idea a “50-50” chance.
The United States government is currently over $14 trillion in debt. Treasury Secretary Timothy Geithner has said that the debt ceiling must be raised by August 2 to prevent a default on the nation's debt obligations.