United States

The failed “grand bargain”

Efforts at compromise by the leadership of both parties—including closed-door negotiations led by Vice President Biden and a bipartisan attempt by the “Gang of Six” (three senators from each party)—repeatedly collapsed in partisan rancor. In July Obama and Republican Speaker of the House John A. Boehner, meeting privately, nearly reached agreement on a "grand bargain" that would have included trillions in spending cuts, changes to Medicare and Social Security, and tax reform. The deal fell through near the end of the month, however, when the two could not agree on the level of additional tax revenue to be generated. Media reports indicated that Boehner had agreed to tax revenue increases of $800 billion, but, when Obama asked for another $400 billion, Boehner nixed the deal. In any case, many believed that the speaker would have been unable to win sufficient support for the agreement from House Republicans, who remained adamantly opposed to tax hikes and had passed a bill requiring a cap on spending and a balanced budget.

Nevertheless, as the threat of default grew more imminent, there was increasing consensus in both parties that the debt ceiling should be raised. With a broad agreement seemingly out of reach, compromise appeared to hang on whether the ceiling would be increased in one step (which would extend the limit past the 2012 election) or two (which would raise the issue again sooner). Senate minority leader Mitch McConnell proposed a solution that would allow the president to raise the ceiling provided that two-thirds of both houses of Congress did not vote against that action (that is, not enough votes to override a presidential veto). Senate majority leader Harry Reid advanced a bill that removed tax increases from the equation.