Another key caveat: Much of the $800 billion would have to come from overhauling the tax code — not from higher tax rates. The Republicans believed lower rates and a simpler code would generate new revenue by discouraging cheating and spurring economic growth. If the White House would agree to count that money, the Republican leaders said, then they might have a deal.
That last condition was a problem. For years, Democrats have mocked the Republican argument that tax cuts pay for themselves by boosting the economy, an assertion for which evidence is scant. Many independent budget experts say the effect, if it exists, would be almost impossible to measure and useless in crafting a budget. Fiscal “snake oil,” some Democrats say.
So there were issues to work out that Sunday but also reason for optimism. In its counterproposal, the White House appeared to accept the $800 billion tax offer and a lower top rate. The administration rejected the exemption for overseas profits, but Geithner told the Republicans, they said, that he could get most of the way there.
And when Boehner brought up economic growth, arguing that his caucus would not accept tax increases under any other terms, the Republicans saw Geithner as receptive, Jackson said. “It was literally one of the last things discussed when they came in on that Sunday. And Geithner said, ‘Yes, we accept that,’ ” Jackson recalled. “We viewed it as a breakthrough.”
On this point, the two sides are in dispute. Geithner and other administration officials say it never happened. They strenuously deny agreeing to count revenue from economic growth, a process known as “dynamic scoring.”
Treasury spokeswoman Jenni LeCompte said the Republicans “were kidding themselves” if they thought the White House would concede that point. “That’s always been a total non-starter for Secretary Geithner and this administration and always will be,” she said.
Whatever the case, by the time Obama returned to the room with Boehner and Cantor after their half-hour Oval Office chat, the focus was on defending their compromise more than debating it. The president looked at the Republicans and wondered how each side could sell the plan when key components — such as taxes — would need to be explained in ways that would attract liberals and conservatives alike.
“Everybody was saying the right thing,” Daley recalled. “Nobody was saying, ‘If you don’t take this then the deal’s over,’ even though there were real differences. We walked away feeling that we were 80 percent there. But no doubt about it, like any negotiation, the final 20 percent is always the most difficult.”
Jackson said the speaker and his aides felt they had reached a general understanding with Obama and the White House. “Everybody felt really upbeat,” Boehner’s top aide recalled. “They were in nervous territory, as were we. But we walked out of there thinking this was coming together, and we had the outlines.”
That afternoon, the Republican team reconvened at the Capitol, pleased with the morning’s progress. They agreed to drop several key demands.
They would accept fewer cuts in a category of spending that includes federal worker benefits. And they would drop the demands on investment income and overseas corporate profits.
Another major concession: Their offer had proposed boosting the debt ceiling just high enough to see the Treasury through March, which would become the new deadline for Congress to approve the more difficult cuts to entitlement programs and to overhaul the tax code. The White House vehemently opposed that approach. Obama did not want to have this debate again in an election year. The White House wanted a “trigger” that would automatically raise taxes on the wealthy and cut health spending, an idea the Republicans opposed. For now, Boehner and Cantor agreed to give up their demand for a short-term debt-limit increase. But talks on the trigger would have to continue.
“Further discussion necessary to finalize,” Boehner aide Brett Loper wrote in the GOP counteroffer he e-mailed to the White House.
Loper hit the send button at 6:55 p.m. Sunday. Nabors replied immediately.
Thanks, Obama’s legislative liaison wrote. We’ll get right to work.
The next morning at the White House, top aides circulated Boehner’s latest offer throughout the West Wing. They met repeatedly in Daley’s office, scouring budget tables and Democratic vote sheets. By mid-afternoon, they told the Republicans that they were about to take a plan to the president for his approval.
A senior administration official said the White House team recognized that the two offers were coalescing and that the time for a decision was at hand. People asked themselves, the official said: Is this something we can sell? Is this a deal we can live with?