Insiders describe tense weekend before debt deal

A bipartisan bill to increase the nation’s debt limit and cut as much as $2.4 trillion in government spending passed the House of Representatives, overcoming the key hurdle on the road to averting an unprecedented federal default.

The legislation, which passed Monday evening by a relatively comfortable 269-161 margin, came after a weekend of tense meetings, exhausted staff discussions and, in the end, a compromise worked out at the highest levels of government. If passed by the Senate on Tuesday, which is widely expected, it will end a months-long standoff between a new Republican House majority, which refused to pass an increase without a deficit reduction package, and the Democratic majority in the Senate and President Obama.

After weeks of on-again, off-again negotiations and grand political theater, the deal came together over the weekend when it was clear Congress no longer had time to spare. Even in the last moments before it was publicly announced, White House aides, who had watched several previous deals collapse, were so fearful of another failure that they were preparing a statement to calm worried markets.

Aides on both sides familiar with the negotiations, who spoke on the condition of anonymity to describe the private discussions, painted a picture of the final pathway. It began with a phone call Friday.

Sen. Mitch McConnell of Kentucky, the Republican leader, had watched quietly for the better part of a week, as House Speaker John A. Boehner (R-Ohio) struggled to tame his defiant right flank and pass a bill that could be the basis for a compromise.

McConnell faced the opposite problem. The Senate minority includes several moderate Republicans who were far more likely to cut a deal with Democrats than risk the economic turmoil of default. If he didn’t want his members working around him, McConnell knew, he had to act.

On Friday, he called Vice President Joe Biden, whom he’d served with in the Senate for decades. He and Biden had spoken several times earlier in the week but had set aside those talks as Boehner struggled with his caucus. Now it was time to restart the discussions.

The next day, the Kentucky senator would announce publicly that things were moving again. He was careful not to one-up Boehner, who had walked away from White House negotiations twice. But his announcement also signaled to his own members that they need not reach out to Democrats on their own.

At a news conference Saturday afternoon, Boehner and McConnell stood side by side.

“I’m confident and optimistic,” McConnell said.

As the GOP leaders spoke to the media, their Democratic counterparts were at the White House — going over the details of an already emerging plan.

McConnell and Biden had picked up the frameworks used in the bill Boehner had gotten through the House on Friday and one crafted by Senate Majority Leader Harry Reid (D-Nev.). Congress could make spending cuts in two stages — one immediate cut of about $1 trillion and another later based on recommendations from a bipartisan committee. In the meantime, the debt ceiling would be allowed to increase.

The primary sticking point was deciding how to pressure Congress to agree to whatever the bipartisan committee came up with, and what to do if the committee plan failed. The idea was to come up with spending cuts that would be triggered automatically if the committee plan were not adopted.

Quietly throughout the week, Biden and McConnell had already been trading ideas for so-called triggers, searching for a formula that would provide enough discomfort so both sides would have an incentive to allow the bipartisan committee to work, but not so much that the results would be intolerable if Congress had to live with them.

As the talks developed, House Minority Leader Nancy Pelosi (D-San Francisco) was on alert. Among the possible triggers under discussion was one that would change the way cost-of-living increases are calculated for Social Security recipients. At a White House meeting Saturday with Obama, Biden and Reid, Pelosi said she would not accept such a proposal.

The White House agreed. In fact, Republicans had signaled they weren’t wild about the idea either. Republicans “have some difficulty with entitlements as well,” McConnell told the White House.

Late Saturday, a new demand from Republican negotiators stunned White House officials. In a conference call with senior administration aides, McConnell’s staff noted that the deal called for sharp cuts in military spending as part of the trigger. The Republican staff members said that getting votes on their side of aisle for the bill would be difficult because of that. As a sweetener, the Republicans asked, would the White House agree to add Medicaid cuts to the trigger?

Talking on a speaker phone in budget director Jacob Lew’s office, Gene Sperling, Obama’s top economic adviser, began to explain why the White House could not go along. Lew interrupted.

“No!” he said. “The answer is simply no, no, no.”

The White House move to hold fast on Medicaid cemented support for the deal among House Democrats, for whom the program, which provides medical care to the poor, is a top priority.

But ruling some triggers out was much easier than finding ones that would work. The fight raged through the weekend. Aides worked all night Saturday crunching numbers. At the White House, a fatigued Lew was starting to doubt his own calculations.

“Could we take a break for 10 minutes so I could just go out there and make sure the numbers I’m giving you are right?” he asked the president. Lew was excused.

By Sunday, leaders had settled on a trigger of across-the-board cuts to both defense and domestic agency spending — but the ratio of the two was still unsettled. At that point the talks deadlocked for much of the day, as Boehner’s aides pushed back against cuts in the Pentagon budget. Late in the day, a solution was found — one for which several participants later claimed credit. The “defense cuts” could come out of all security spending, including Homeland Security, the CIA and other parts of the government’s national security budget, thus softening the blow to the military.

But Boehner was slow to jump on.

At the White House, senior aides began plotting contingencies in case the deal fell apart. They considered having Treasury Secretary Timothy Geithner make a public statement in hopes of preventing a market meltdown on Monday.

In an Oval Office meeting around 5 p.m. Sunday, top aides began gaming out what Geithner should say “to calm markets.”

Reid had another approach. His office sent out a one-sentence statement announcing he had signed on to an agreement, putting the ball publicly in Boehner’s court. Boehner and McConnell stayed quiet for another three hours.

At 8:15, when the president called the speaker from the Oval Office, aides were still unsure what the answer would be.

“Do we have a deal?” Obama asked, according to a Democratic official familiar with the call. Aides could hear Boehner interrupt the president. They took that as a bad sign. Maybe Boehner was pulling away one more time.

A few seconds later, Obama said, “Congratulations to you, too, John.”

kathleen.hennessey@latimes.com

kisa.mascaro@latimes.com

peter.nicholas@latimes.com