July 24, 2011 / 12:33 PM / 8 years ago

Factbox: How the Obama/Boehner debt talks unraveled

WASHINGTON (Reuters) - President Barack Obama and House Speaker John Boehner had agreed on the rough outlines of a far-reaching budget deal that would allow the United States to avert an imminent default before Boehner broke off talks on Friday.

Here is a summary of what the two sides had agreed upon, where they had differed, and how things fell apart:


Boehner and his deputy, House Republican Leader Eric Cantor, lay out a proposal to White House Chief of Staff Bill Daley and Treasury Secretary Timothy Geithner in a meeting at the Capitol.

The deal envisions a two-step process, in which Congress would avert an August 2 default by raising the debt ceiling and agreeing to caps on the annual discretionary spending that covers everything from the military to national parks.

Congress would only raise the debt ceiling by enough money to cover the country’s borrowing needs for six to eight months — roughly $900 billion to $1.2 trillion.

During that time, Congress would tackle far-reaching reforms to health benefit programs and the Social Security retirement program.

The Republicans propose simplifying the tax code to eliminate loopholes and deductions, resulting in three income-tax rates.

The top rate would be lower than the 35 percent rate currently in place, and as close as possible to a new, lowered corporate tax rate below 30 percent. This would minimize the penalty for small-business owners who file their taxes as individuals.

Under this scenario, the government would collect $36.2 trillion over 10 years — $800 billion more than it would collect if temporary tax breaks enacted under President George W. Bush were allowed to expire. Republicans say the additional revenue would come from a revitalized economy under a simpler tax scheme, not increased levels of taxation.


The same four negotiators met at the White House in the late morning, joined by White House budget director Jacob Lew. Obama appears briefly.

Geithner indicates he is comfortable with the Republicans’ tax proposal, according to Republican aides. The two sides differ on the extent of the proposed cuts to discretionary and mandatory programs.

The main difference at this point is how to ensure that Congress will act on the reforms within the time frame.

Democrats say they are uncomfortable with the short-term debt-ceiling hike the Republicans had proposed, pushing instead for an increase that would cover the country’s borrowing needs through the November 2012 elections, according to Republicans.

Instead, they propose a different set of “triggers.” Tax rates on the wealthy would rise back to their 1990s levels — which would cause political pain for Republicans — while Medicare and Medicaid, the health plans for the elderly and the poor, would suffer a total of $425 billion in budget cuts.


A bipartisan group of senators known as the “Gang of Six” releases a budget proposal of their own, which calls for a higher overall tax figure. That proposal is received warmly by Democrats and Republicans in the Senate.

That evening, the White House proposes changes to the tax rewrite, saying that the “Gang of Six” had given them political momentum, according to Republicans. They propose a new revenue figure of $36.6 trillion, $400 billion above the previous level, and say it should serve as a minimum, not a maximum, figure.

The White House also says it does not agree with the Republican proposal that the top income tax rate does not exceed 35 percent, or that it should be close to the lower corporate-tax rate.


Boehner and Cantor meet with Obama and Vice President Joe Biden at the White House. The discussion centers around the trigger: Republicans argue that slashing Medicare and Medicaid would cause political pain for both parties, not just Democrats. Instead, they propose that two central elements of Obama’s new healthcare reform — the requirement that individuals buy health insurance, and an independent board to oversee Medicare — be struck from that law.

The two sides by this point have reached agreement on a number of other areas.

They have agreed to cut discretionary spending by $1.2 trillion over 10 years, with a guaranteed portion of that coming from the military and other security programs that Republicans normally protect. They have agreed to count an anticipated $1 trillion in savings from winding down the wars in Iraq and Afghanistan, according to the White House.

On benefit programs, they have agreed to slow the growth of Social Security benefits by changing the way they are indexed to inflation.

On health programs, they have agreed to gradually raise the Medicare eligibility age from 65 to 67, negotiating lower prices for prescription drugs, and making other administrative



The White House refuses the Republican proposal to change its trigger from Medicare and Medicaid to its signature health-reform law. Boehner says he could not sell his fellow Republicans on the higher tax revenues sought by the White House. According to the White House, the two sides still disagree over the amount that would be saved by the Medicaid overhaul as well — $120 billion vs. $150 billion.

According to the White House, Obama tries to call Boehner in the evening, but does not hear back.


Boehner’s office emailed back at 3:30 in the afternoon, according to the White House, and says he would not be able to speak with Obama until 5:30 p.m.

At 5:00 p.m., Boehner jokes with reporters in his office suite. His staff breaks the news that talks have broken down. At 5.30 p.m., Boehner tells Obama he does not think they can move forward with the negotiations.

Reporting by Andy Sullivan and Alister Bull

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below