In a struggle to cut the national debt, President Barack Obama faces a dilemma that will stay with him even if he succeeds in striking a grand deal with Congress: convincing Americans that the entire effort will do anything to create desperately needed jobs.
Obama ties deficit reduction to jobs, on the basis that trying to balance the nation’s books will promote economic stability and give businesses more confidence to hire. But that’s a tough sell to the millions of Americans out of work right now. And the communications problem just got harder.
The latest snapshot of the economy was a body blow that showed employers added a meager 18,000 jobs in June. The leaders of the country are consumed with negotiating a major debt-reduction deal built upon cutting spending and raising taxes. It is not directly aimed at boosting jobs. Obama’s challenge is to link all this in meaningful terms and to get faster results. At stake are the country’s economic recovery and his re-election chances.
House Speaker John Boehner declared in a statement Saturday evening that he can not agree to the tax increases Democrats insisted on as part of the bargain. A Republican source familiar with situation said that Boehner made his decision after speaking with the president by phone on Saturday afternoon, a day ahead of a major White House meeting with Democratic and GOP leadership.
Obama proposed to Republicans a “grand bargain” that accomplished a host of individual things that are unpopular on their own, but that just might pass as a huge package jammed through Congress with default looming. Obama offered to put Social Security, Medicare and Medicaid cuts on the table in exchange for a tax hike of roughly $100 billion per year over 10 years. Meanwhile, government spending would be cut by three times that amount.
Republicans are now banking on a smaller deficit reduction deal that would still make major cuts in the range of $2 trillion. Boehner said in a statement: “Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes.”
He added: “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.”
Taxes are put forward as a major cause of the collapse of the grand bargain. A Republican familiar with the discussions said that the two parties couldn’t come to an agreement on cuts to entitlements. “The White House would not agree with the core elements of tax reform proposed by the Speaker,” said the official. “A gulf also remains between the Speaker and the White House on the issue of medium and long-term structural reforms.”
When it came out that Obama was proposing cuts to entitlements, Democrats in Congress and outside advocates kicked their opposition, making it clear that no bargain would win their support if it contained any cuts to Social Security or Medicare beneficiaries. That opposition may have broken the back of the bargain.[via Huffington Post, Detroit Free Press, San Francisco Chronicle, Politico ]