John Boehner Rejects Obama's Grand Bargain On Debt Ceiling

WASHINGTON -- House Speaker John Boehner is rejecting President Obama's offer to make historic cuts to the federal government and the social safety net, saying in a statement Saturday evening that he can not agree to the tax increases Democrats insisted on as part of the bargain.

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, a Republican source familiar with situation said.

Obama had 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 roughly three times that amount. It's no small irony that the party's dogmatic opposition to tax increases is costing the GOP its best opportunity to roll back social programs it has long targeted.

Republicans are now banking on a smaller deficit reduction deal that would still make major cuts, somewhere in the range of $2 trillion.

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," Boehner said in a statement. "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."

While taxes are being 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 word leaked out this past week that Obama was proposing cuts to entitlements, Democrats in Congress and outside advocates kicked their opposition into high gear, 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.

UPDATE: White House Communications Director Dan Pfeiffer issued the following statement:

"The President believes that solving our fiscal problems is an economic imperative. But in order to do that, we cannot ask the middle-class and seniors to bear all the burden of higher costs and budget cuts. We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree.

"Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington. The President believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so tomorrow, he will make the case to congressional leaders that we must reject the politics of least resistance and take on this critical challenge."

Senator Harry Reid (D-Nev.) released the following statement late Saturday night:

I am disappointed that Republicans are unable to work with us to take a historic step forward that would have dramatically reduced our long-term deficit. We asked Republicans to consider a balanced approach that would have required shared sacrifice, but they would not. We still need to make sure we avert the economic catastrophe that would occur if we were to let America fail to pay its bills for the first time in our history, and I am confident that we will. Americans have a right to expect their leaders to rise above partisanship and do the right thing for our economy and the middle class.

Senator Chuck Schumer (D-N.Y.) released the following statement:

The President has called the Republicans' bluff by offering them exactly the type of grand bargain they said they wanted, only to have it rejected. Speaker Boehner had shown in the last week that, if it were up to him alone to decide, the nation would not be risking default to protect the wealthiest two percent of Americans. But in the end, neither the olive branch extended by the President nor the pragmatic streak shown by Speaker Boehner was enough to overcome the far right's obsession with defending tax breaks for millionaires and other special-interest tax loopholes. Some on the Republican side would like to confuse the issue by pretending it was tax hikes on the middle class that they were trying to prevent, but none were ever on the table. This decision to reject the President's offer means as much as a trillion-dollar gulf remains between the two sides on a debt limit deal, and Republicans should be put on notice that no matter how hard they try, their plan to end Medicare as we know it will never fill in that gap.