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Democrats erupt over latest plan on debt ceiling

As President Obama pushed hard for a grand deal to reduce the federal deficit, he ignited a furor among congressional Democrats on Thursday by appearing to retreat from his insistence that spending cuts and revenue increases be included in the same package.

The White House briefed Democratic leaders on a possible $3-trillion deficit-reduction deal, the latest in a rapid-fire series of proposals aimed at winning congressional approval for an increase in the nation’s $14.3-trillion borrowing limit before Aug. 2. That’s when the government is expected to run short of funds and risk defaulting on its debt.

An early version of the plan would lock in cuts in spending and social programs, as Republicans want, but appeared to defer decisions on increasing tax revenues until 2012. Under the proposal, Congress would take up comprehensive tax reform next year. But Democrats want enforceable measures to ensure that Republicans follow through on increasing revenue.

Throughout the day, White House aides scrambled to tamp down a simmering Democratic revolt, insisting that Obama had not agreed to forgo an increase in revenues. But at least for a time, he was in danger of losing support among his own party, including in the Democratic-controlled Senate.

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A White House official was meeting with Democratic senators behind closed doors when word spread about the proposed framework. The reaction was “volcanic,” said Sen. Barbara A. Mikulski (D-Md.).

“What’s so grand about cutting the social safety net, eliminating children’s health programs, firing teachers and firefighters?” asked influential Democratic strategist Donna Brazile in a Twitter message. “That’s cowardly.”

Obama summoned the Democratic congressional leaders, Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-San Francisco), to the White House for an evening meeting. The president also said in an NPR interview Thursday that revenue increases must be part of the budget agreement.

But in early outlines of the proposal, it appeared to rely more heavily on spending cuts to constitute the $3-trillion package.

The proposal appears to differ from the $4-trillion “balanced approach” of spending cuts and new revenues that Obama had sought. It also veers from the strict $2.4-trillion package of spending cuts that many Republicans want.

Still, the plan would represent a sizable gain for Republicans, who want spending cuts in return for an increase in the debt ceiling but abhor steps to increase revenues, which they call tax increases.

Few officials were willing to discuss how tax reforms might be addressed next year as part of the deal. One possibility described by Democrats would be mechanisms known as “triggers” that require Congress to act on taxes, but officials involved in the negotiations would not provide details.

Democrats were deeply troubled by the prospect of a plan that would cut programs now but wait until next year to act on taxes.

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“If you’re doing any grand bargain, that has to include a revenue component that would have to be guaranteed and locked in,” said Rep. Chris Van Hollen (D-Md.) in an interview.

Democratic officials familiar with the talks acknowledged that they face a challenge coming up with triggers or other enforcement mechanisms to ensure that the sides come back to the bargaining table and work out changes to the tax code and entitlement programs in coming months.

Political leaders don’t have time to strike an agreement on taxes and social programs in the next few days, said three Democratic officials who would describe the talks only on the condition of anonymity. Instead, they’re seeking a plan to put agreed-on cuts and perhaps minor revenue changes in writing now, along with targets for tougher tasks to be addressed later.

But Obama is insisting that no medium-sized or large deal go through without addressing the issue of revenues in writing, according to the White House.

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House Speaker John A. Boehner (R-Ohio) steadfastly denied that a deal was imminent. He walked cheerily through throngs of tourists in the Capitol, declining to answer questions from reporters with more than a quip or a smile.

The spending cuts would probably affect every federal agency as well as programs like Medicare and Social Security that Democrats have fought to protect throughout debt negotiations.

A key question is the proposal’s effect on the tax cuts enacted during President George W. Bush’s administration, which are due to expire in December 2012.

Democrats and liberals were skeptical that Republicans would agree to increase revenues once the spending cuts were instituted. Civil rights leaders visited the Oval Office on Thursday to argue that deep cuts in the social safety net would hurt those already suffering.

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Benjamin T. Jealous, president of the National Assn. for the Advancement of Colored People, and Marc H. Morial, National Urban League president, said afterward that they believed Obama understood that major changes to those social programs would be harmful.

Earlier this week, Obama tried to rally support behind a bipartisan Senate plan to cut spending, end tax breaks, close loopholes and lower overall tax rates. That plan’s $1 trillion in new revenues would have faced strong opposition among House Republicans.

The Senate plans to vote Friday on a House-passed Republican plan that would cut spending and tightly cap future government budgets. It is expected to be rejected.

Boehner plans to assemble the entire GOP conference for a meeting Friday morning, but lawmakers have been told they do not need to stay in Washington over the weekend, signaling that a deal is unlikely before next week.

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Financial markets have been reacting daily to the standoff, and business leaders have urged action to raise the debt ceiling. A government default would have “real, immediate, and potentially catastrophic consequences,” said Bruce Josten, a top official of the U.S. Chamber of Commerce.

The Dow Jones industrial average closed higher on Thursday during talks over the latest proposal.

lisa.mascaro@latimes.com

cparsons@latimes.com

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Staff writers Kathleen Hennessey and Peter Nicholas in Washington contributed to this report.


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