President Obama will keep pushing for “the biggest deal possible” in talks to reach an agreement with Republicans on cutting the deficit and raising the federal debt ceiling by an August 2 deadline, Treasury Secretary Timothy Geithner said on Sunday.
Geithner and White House Chief of Staff William Daley said Obama still intends to try to forge a broader package incorporating spending cuts and tax reforms before the deadline when the U.S. will default on its loans – even after House Speaker John Boehner, R-Ohio, announced Saturday night that he was pulling out of efforts to reach a broader deal.
Obama “wants to do the largest possible deal that’s going to do the most for the economy," Geithner said on CBS's Face the Nation. "And it’s very hard politically. It’s going to take some movement on both sides for that to happen. The president has made it clear he’s willing to do some very difficult political things for him, for his party, but the Republicans are going to have to do some things too.”
Speaking on ABC’s This Week, Daley agreed.
“That’s the president’s commitment," Daley said. "He’s not someone who’s going to walk away from a tough fight. He’s not someone who came to this town to do little things; he came to do big things.
“A number around $4 trillion is the number that will make a serious dent in our deficit and send a signal that” the U.S. is serious about addressing its deficit, he said.
But on Sunday morning, Senate Minority Leader Mitch McConnell, R-Ky., reaffirmed the GOP position that prospects for a broader deal to cut the deficit by $4 trillion with a combination of spending cuts and tax reforms are dead. “We think it's a terrible idea. It's a job-killer,” McConnell said, speaking on Fox News Sunday.
With the stakes rising and prospects for a deal of any kind seemingly on the verge of collapse, Obama and congressional leaders will meet at the White House at 6 p.m. on Sunday.
Republican leaders repeatedly pounced on Friday’s dismal report of a 9.2 percent unemployment rate to justify pulling out from the talks for a broader deal, saying that in the next two weeks they will work only towards a smaller deal to cut spending and reduce the deficit by about $2 trillion, kicking down the road efforts to overhaul the tax code.
Some Republicans, including Boehner and Arizona Sen. John McCain, had in recent weeks expressed a willingness to include some kind of tax reform in this summer’s larger package. McCain last week called on the negotiators to slash an industrial manufacturing tax credit that would end a $1.8 million annual subsidy to the oil and gas industry.
But tea party conservatives appear to have won an internal debate within the Republican Party with their insistence that a final deal include no tax increases whatsoever.
Sen. Jim DeMint, R-S.C., speaking on Fox News Sunday, said Republicans will only sign on to a debt ceiling agreement that cuts spending and includes a constitutional amendment requiring the federal government to have a balanced budget – a package that has almost no chance of passing Congress.
Republicans said they pulled out of the talks for a broader deal because Obama had taken off the table the prospect of cutting spending on entitlement programs, including Social Security and Medicare.
But Geithner said that was false – and that Obama is still willing to consider cuts in Medicare and Social Security spending despite opposition from within his own party.
“In a balanced way we have to find savings across the government including Medicare and Medicaid,” Geithner said. "We will find ways to get more savings – but we will not do it in a way that shifts more burden on middle–class families. Democrats and this president are willing to do very hard things politically but only as part of a deal that’s balanced. Why is it fair to ask elderly Americans to take more of the burden if those savings are going to sustain special interest tax breaks?”
Democrats are betting that it will benefit them politically to continue to hold out for a broader deal that would reform taxes and cut spending, even on sacred cows like Medicare, as Republicans refuse to compromise and bring the nation – and the global economy – to the brink of catastrophe should the U.S. breach, or come close to breaching, the debt limit.
Geithner warned on Sunday that failing to lift the debt ceiling could have “catastrophic” reverberations throughout the economy, including the downgrading of the U.S. credit rating for the first time in history.
But tea party Republicans continue to downplay the possible consequences of failing to reach a deal.
“Secretary Geithner is being irresponsible," DeMint said. "He’s playing Chicken Little.
“The president’s obligation is to pay those bills, and we should have a contingency plan,” he added.
But the world’s leading economists continue to join Geithner in warning of dire consequences if U.S. negotiators fail to reach a deal.
The new chief of the International Monetary Fund, Christine Lagarde, predicted "real nasty consequences" for the U.S. and global economies if the U.S. fails to raise its debt limit by August 2.
Lagarde said on This Week that a U.S. default on the debt ceiling would lead to “interest hikes, stock markets taking a huge hit,” and would jeopardize global economic stability.
“It would be bad news for the U.S. economy,” with a “heavier burden to be borne by U.S. taxpayers,” she said.
Lagarde said she still believes the White House and congressional leaders will reach a deal before August 2.
“I can’t imagine for a second that the U.S. will default,” she said. “I would hope there’s enough bipartisan intelligence to work it out.”