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THE SITUATION ROOM
President Obama Speaks Out on Debt Negotiations
Aired July 22, 2011 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is CNN Breaking News.
WOLF BLITZER, HOST: And as we await the president of the United States at the White House, let's go to Capitol Hill.
Our congressional correspondent, Kate Bolduan, is standing by.
Kate, what are you hearing from your sources up on the hill?
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Very important news this is evening, Wolf. We learned from Republican leadership sources here on the Hill that Speaker Boehner has called President Obama this evening to tell him that he is pulling out of the talks, out of the negotiations that they have been working so hard on over the past weeks now.
And in a letter that I have right here that he is sending to his House members, it says in this letter -- quote -- I'm going to read it to you real quick -- "I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward."
According to these sources that we have been speaking to, the focus now completely turns here on Capitol Hill. These sources say that the interests that they heard from the White House do not align with what they think the interests are of the Congress in raising the debt ceiling and tackling some of these big issues that have been holding up this process that we have been talking about.
And so now the speaker will be working with the leaders of the Senate to find a path forward. And while we are told by these sources that they aren't exactly sure exactly what that path forward is, we are still told that they maintain, they believe that they need to have something to unveil to their members in the House by Monday in order to have a vote and in order to get it over to the Senate in order to beat this August 2 deadline that we are now coming upon.
And if I have just a second still, Wolf, I can tell you that, how this all unravel? Well, according to these sources, they tell us that it came down to that they are working towards a path of some serious -- of a serious debt reduction plan. They had agreed on a framework and had put some serious things on the table.
But what happened is when the gang of six, according to these House sources, according to these sources, when the gang of six unveiled their plan on Tuesday, they believed that the negotiations began to unravel and that with the White House the dynamic, according to them, they said the dynamic changed and the White House began to pull back on some the things that they said had been generally agreed to.
And that's where they stand at this point -- Wolf.
BLITZER: So right now what you're reporting, Kate, is that the speaker of the House, John Boehner, has informed the president of the United States he is suspending, calling off all of the negotiations to try to reach some sort of compromise formula that would allow the United States to raise the debt ceiling by the August 2 deadline. Is that right?
BOLDUAN: That's absolutely right. And we have been told in this briefing room that we received, is that they will now need to work very hard over this weekend in order to find out what that compromise path forward is, because these sources were pressed several times on, well, what are you actually looking at?
And we were told they were making no judgments and no assumptions. They just had all agreed to -- and they made a point to emphasize this to show that they were confident that they would reach a deal in order to beat this deadline. Because everyone involved, the leadership on the House, the leadership in the Senate, they all have agreed that they need to come to some agreement, that this is very serious and they are confident that they will find a compromise to beat this deadline -- Wolf.
BLITZER: And the president presumably will walk out within the next minute or two to that podium in the Briefing Room at the White House and make his announcement. I am sure he will express his deep disappointment.
This letter that you have, this is a letter that Boehner is sending to the Republican members of the House; is that right?
BOLDUAN: That's exactly right.
And we were told that the letter is now at least going out is the way it was described to me to their colleagues. Another line or two from this letter is that according to this letter, it's signed by John Boehner. It says: "The president is emphatic that taxes have to be raised. As a former small businessman, I know tax increases destroy jobs."
He goes on to say: "The president is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won't be there for their generation unless significant action is taken now."
So you can see here that John Boehner is really trying to make the case why he now has to change this focus, why there is now this kind of abrupt shift of focus from trying to work with the White House. And now he says basically they have abandoned those talks completely, Wolf, and now it's up to the House and the Senate up here on the Hill. BLITZER: And we will see what the president has to say. He is getting ready to walk out momentarily to that microphone, within the next few seconds in fact. We're told the president will make a statement. We will see if he sticks around and answers reporters' questions.
No doubt the president deeply, deeply disappointed that the speaker of the House, according to our Kate Bolduan reporting, the speaker of the House now suspending the negotiations with the White House to come up with some sort of modest or large-scale agreement that would allow the United States to go forward and raise the nation's debt ceiling.
The president of the United States will make the statement momentarily. It is a dramatic moment.
He's walking in right now. So let's listen.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Good evening, everybody. I wanted to give you an update on the current situation around the debt ceiling. I just got a call about a half hour ago from Speaker Boehner, who indicated that he was going to be walking away from the negotiations that we've been engaged in here at the White House for a big deficit reduction and debt reduction package.
And I thought it would be useful for me to just give you some insight into where we were and I think that we should have moved forward with a big deal. Essentially what we had offered Speaker Boehner, was over a trillion dollars in cuts to discretionary spending, both domestic and defense.
We then offered an additional $650 billion in cuts to entitlement programs; Medicare, Medicaid, Social Security. We believed that it was possible to shape those in a way that preserved the integrity of the system, made them available for the next generation and did not affect current beneficiaries in an adverse way.
In addition, what we sought was revenues that were actually less than what the Gang of Six signed off on. So you had a bipartisan group of senators including Republicans who are in leadership in the Senate, calling for what effectively was about $2 trillion above the Republican baseline that they have been working off of.
What we said was, give us $1. 2 trillion in additional revenues, which could be accomplished without hiking taxes -- tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally, while broadening the base.
So, let me reiterate what we were offering. We were offering a deal that called for as much discretionary savings as the Gang of Six. We were calling for taxes that were less than what the Gang of Six had proposed and we had -- we were calling for modifications to entitlement programs would have saved just as much over the 10 year window. In other words, this was an extraordinarily fair deal. If it was unbalanced, it was unbalanced in the direction of not enough revenue. But in the interest of being serious about deficit reduction, I was willing to take a lot of heat from my party and I spoke to Democratic leaders yesterday and although they didn't sign off on a plan, they were willing to engage in serious negotiations despite a lot of heat from a lot of interest groups around the country in order to make sure that we actually dealt with this problem.
It is hard to understand why Speaker Boehner would walk away from this kind of deal and frankly, if you look at the commentary out there, there are a lot of Republicans that are puzzled as to why it couldn't get done. In fact, there are a lot of Republican voters out there who are puzzled as to why it couldn't get done.
Because the fact of the matter is, the vast majority of the American people believe we should have a balanced approach. Now, if you do not have any revenues, as the most recent Republican plan that's been forward, both in the House and the Senate proposed. If you have no revenues at all, what that means is more of a burden on seniors, more drastic cuts to education, more drastic cuts to research, a bigger burden on services that are going to middle-class families all across the country. And it essentially asks nothing of corporate jet owners. It asks nothing of oil and gas companies. It asks nothing from folks like me who have done extremely well and can afford to do a little bit more. In other words, if you don't have revenues, the entire thing ends up being tilted on the backs of the poor and middle-class families.
And the majority of Americans don't agree on that approach. So, here's what we're going to do. We have now run out of time. I told Speaker Boehner, I have told Democratic Leader Nancy Pelosi, I have told Harry Reid and I have told Mitch McConnell I want them here at 11 o'clock tomorrow.
We have run out of time, and they are going to have to explain to me how it is that we are going to avoid default.
And they can come up with any plans that they want, and bring them up here, and we will work on them. The only bottom line that I have is that we have to extend this debt ceiling through the next election, into 2013.
And the reason for it is we've now seen how difficult it is to get any kind of deal done. The economy is already weakened. And the notion that five or six or eight months from now we'll be in a better position to try to solve this problem makes no sense.
In addition, if we can't come up with a serious plan for actual deficit and debt reduction, and all we're doing is extending the debt ceiling for another six, seven, eight months, then the probabilities of downgrading U.S. credit are increased.
And that will an additional cloud over the economy, and make it more difficult for us and more difficult for businesses to create jobs that the American people so desperately need. So they will come down here at 11 o'clock tomorrow. I expect them to have an answer in terms of how they intend to get this thing done over the course of the next week.
The American people expect action. I continue to believe that a package that is balanced and actually has serious debt and deficit reduction is the right way to go.
And the American people, I think, are fed up with political posturing and an inability for politicians to take responsible action, as opposed to dodge their responsibilities.
All right. With that, I'm going to take some questions.
QUESTION: Thank you, Mr. President. You said you want the leaders back here at 11 to give you an answer about the (OFF-MIKE) What is your answer about the (OFF-MIKE)
What path do you prefer, given what's just happened? And also -- and also very quickly, what does it say about your relationship with Speaker Boehner?
OBAMA: Well, with respect to my relationship with Speaker Boehner, we've always had a cordial relationship. We had very intense negotiations. I'm going to have my team brief you exactly on how these negotiations proceeded.
Up until some time early today, when I couldn't get a phone call returned, my expectation was that Speaker Boehner was going to be willing to go to his caucus and ask them to do the tough thing but the right thing.
I think it has proven difficult for Speaker Boehner to do that. I have been left at the altar now a couple of times.
And I think that, you know, one of the questions that the Republican Party is going to have to ask itself is can they say yes to anything? Can they say yes to anything?
I mean, keep in mind, it's the Republican Party that has said that the single most important thing facing our country is deficits and debts.
We've now put forward a package that would significantly cut deficits and debt. It would be the biggest debt reduction package that we've seen in a very long time.
And it's accomplished without raising individual tax rates. It's accomplished in a way that's compatible with the no-tax pledge that a whole bunch of these folks signed onto, because we were mindful that they had boxed themselves in.
And we tried to find a way for them to generate revenues in a way that did not put them in a bad spot. And so the question is, what can you say yes to?
Now if their only answer is what they have presented, which is a package that would effectively require massive cuts to Social Security, to Medicare, to domestic spending, with no revenues whatsoever, not asking anything from the wealthiest in this country or corporations that have been making record profits, if that's their only answer, then it's going to be pretty difficult for us to figure out where to go, because the fact of the matter is, that's what the American people are looking for, is some compromise, some willingness to put partisanship aside, some willingness to ignore talk radio or ignore activists in our respective bases, and do the right thing.
And to their credit, Nancy Pelosi, Harry Reid, the Democratic leadership, they sure did not like the plan that we were proposing to Boehner, but they were at least willing to engage in a conversation because they understood how important it is for us to actually solve this problem.
And so far, I have not seen the capacity of the House Republicans in particular to make those tough decisions.
And then so then the question becomes, where's the leadership or, alternately, how serious are you actually about debt and deficit reduction? Or do you simply want it as a campaign ploy going into the next election?
Now in terms of where we go next, here's the one thing that we've got to do. At minimum, we've got to increase the debt ceiling, at minimum. I think we need to do more than that.
But as I have said before, Republican Leader McConnell in the Senate put forward a plan that said he's going to go ahead and give me the responsibility to raise the debt ceiling. That way, folks in Congress can vote against, but at least it gets done.
I'm willing to take the responsibility. That's my job. And so if they want to give me the responsibility to do it, I'm happy to do it.
But what we're not going to do is to continue to play games and string this along for another eight, nine months, and then have to go through this whole exercise all over again. That we're not going to do. (OFF-MIKE)
QUESTION: (OFF-MIKE) can you assure the American people that they will get their Social Security checks on August 3? And if not, who's to blame?
OBAMA: Well, when it comes to all the checks, not just Social Security, veterans, people with disabilities, 70 -- about 70 million checks are sent out each month.
If we default, then we're going to have to make adjustments. And I'm already consulting with Secretary Geithner in terms of what the consequences would be. We should not even be in that kind of scenario. And if Congress -- and, in particular, the House Republicans -- are not willing to make sure that we avoid default, then I think it's fair to say that they would have to take responsibility for whatever problems arise in those payments, because let me be -- let me repeat, you know, I'm not interested in finger pointing and I'm not interested in blame.
But I just want the facts to speak for themselves. We have put forward a plan that is more generous to Republican concerns than a bipartisan plan that was supported by a number of Republican senators, including at least one that is in Republican leadership in the Senate.
Now I will leave it up to the American people to make a determination as to how fair that is, and if the leadership cannot come to an agreement in terms of how we move forward, then I think they will hold all of us accountable.
But that shouldn't even be an option. That should not be an option.
I'm getting letters from people who write me and say, at the end of every month I have to skip meals, senior citizens on Social Security who are just hanging on by a thread, folks on, you know, who have severe disabilities, who are desperate every single month to try to figure out how they're going to make ends meet.
But it's not just those folks. You've got business contractors who are providing services to the federal government, who have to wonder, are they going to be able to get paid and what does that do in terms of their payrolls?
You know, you've got just a huge number of people who, in one way or another, interact with the federal government.
And even if you don't, even if you're not a recipient of a -- of Social Security, even if you don't get veterans' benefits or disabilities, imagine what that does to the economy when suddenly 70 million checks are put at risk.
I mean, if you're a business out there, that is not going to be good for economic growth. And that's the number one concern of the American people. So we've got to get it done. It is not an option not to do it.
OBAMA: I am confident, simply because I cannot believe the Congress would end up being that irresponsible that they would not send a package that avoids a self-inflicted wound to the economy at a time when things are so difficult.
QUESTION: Mr. President, can you explain why you were offering a deal that was more generous than the Gang of Six, which you seemed to be embracing on, on Tuesday with your package?
OBAMA: Because what had become apparent was that Speaker Boehner had some difficulty in his caucus. There are a group (sic) of his caucus that actually think default would be OK. And have said that they would not vote for increasing the debt ceiling under any circumstances.
And so I understand how they get themselves stirred up and the sharp ideological lines that they have drawn. And ultimately, my responsibility is to make sure that we avoid extraordinary difficulties to American people and American businesses.
And so, you know, unfortunately when you're in these negotiations, you don't get 100 percent of what you want. You may not even get 60 or 70 percent of what you want. But, I was willing to try to persuade Democratic leadership as well as Democratic members of Congress that even a deal that is not as balanced as I think it should be, is better than no deal at all.
And I was willing to persuade Democrats that getting a handle on debt and deficit reduction is important to Democrats, just as much as it's important to Republicans. And frankly, a lot of Democrats are persuaded by that.
As I said in the last press conference, if you're a progressive, you should want to get our fiscal house in order. Because once we do, it allows us to then have a serious conversation about the investments that we need to make; like infrastructure, like rebuilding our roads and our bridges and airports, like investing more in college education, like making sure that we're focused on the kinds of research and technology that's going to help us win the future.
It's a lot easier to do that when we've got our fiscal house in order. And that was an argument that I was willing to go out and make to a lot of skeptical Democrats as you saw yesterday. But ultimately that's what we should expect from our leaders. If this was easy, it would have already been done.
And I think what -- what a lot of the American people are so disappointed by, is this sense that all the talk about responsibility, all the talk about the next generation, all the talk about making sacrifices, that when it comes to actually doing something difficult, folks walk away.
Last point I will make here, I mean I have gone out of my way to say that both parties have to make compromises. I think this whole episode has indicated the degree to which, at least a Democratic president has been willing to make some tough compromises. So when you guys go out there and write your stories, this is not a situation where somehow this was the usual food fight between Democrats and Republicans.
A lot of Democrats stepped up. In ways that were not advantageous politically. So we've shown ourselves willing to do the tough stuff on an issue that Republicans ran on.
QUESTION: Mr. President, there seems to be an extraordinary breakdown of trust involved here. And I wonder if you could address what we're hearing from Republicans, which is that there was a framework and a deal that was agreed with your chief of staff, with the Treasury secretary about the certain number of revenues that the Republicans had agreed to that.
And then after you brought that to your party and the decisions was that, the goal line was moved. Is this an example of where the goal line has moved and that that is what has lead to that breakdown in trust?
OBAMA: What I will do is we'll do a tick-dock. We'll go through all the paper. We'll walk you through this process. You know, what this came down to was that there doesn't seem to be a capacity for them to say "yes."
Now what is absolutely true is we wanted more revenue than they had initially offered. But as you'll see, the spending cuts that we were prepared to engage in, were at least as significant as the spending cuts that you've seen in a whole range of bipartisan proposals and we had basically agreed within $10 billion - $20 billion -- we were within that range.
So that wasn't the reason this thing broke down. And we were consistent in saying that it was going to be important for us to have at least enough revenue that we could protect current beneficiaries of Social Security, for example, or current beneficiaries of Medicare, that we weren't slashing Medicaid so sharply that states suddenly were going to have to throw people off the health care rolls.
And we were consistent in that. So I want to be clear. I'm not suggesting that, you know, we had an agreement that was signed, sealed and delivered. The parties were still apart as recently as yesterday. But when you look at the overall package, there's no changing of the goalposts here. There has been a consistency on our part in saying; we're willing to make the tough cuts and we're willing to take on the heat for those difficult cuts.
But that there's got to be some balance in the process. What I have said publicly is the same thing that I have said privately. And I have done that consistently throughout this process. Now with respect to this breakdown in trust, I think that, you know, we have operated above board consistently.
There haven't been any surprises. I think the challenge really has to do with the seeming inability, particularly in the House of Representatives to arrive at any kind of position that compromises any of their ideological preferences. None. And you've heard it.
I'm not making this up. I think they're -- a number of members of that caucus have been very clear about that. And ...
QUESTION: But they were willing to move on some revenues, apparently.
OBAMA: Absolutely. The -- but what you saw - and -- and again, you know, you'll see this from the description of -- of the deal. Essentially what they agreed to give on is to get back to a baseline -- this starts getting technical, but there were about $800 billion in revenue that were going to be available.
And what we've said was; when you've got a ratio of four cut -- four dollars in cuts for every one dollar of revenue, that's pretty hard to stomach. And we think it's important to make sure that whatever additional revenue is in there, covers the amount of money that's being taken out of entitlement programs. That's only fair.
If I'm saying to future recipients of Social Security or Medicare that you're going to have to make some adjustments, its important that we're also willing to make some adjustments when it comes to corporate jet owners or oil and gas producers or people who are making millions or billions of dollars.
QUESTION: You said that your bottom line has been the big deal, that's not going to happen. Are you -- are you going to be willing to go back to just a raising the debt ceiling bill?
OBAMA: Well I think I -- I have been consistently saying here in this pressroom and everywhere that it is very important for us to raise the debt ceiling. We don't have an option on that. So, if that's the best that Congress can do, then I will sign an extension of the debt ceiling that takes us through 2013.
I don't think that's enough. I think we should do more. That's the bare minimum. That's the floor of what the American people expect us to do. So I would like to see us do more and when I meet with the leadership tomorrow, I'm going to say; let's do more. But if they tell me that's the best they can do? Then I will sign an extension that goes to 2013, and I will make the case to the American people that we've got to continue going out there and solving this problem.
It's the right thing to do, and it's time to do it. We can't keep on putting it off.
QUESTION: Speaker Boehner didn't return the phone call this afternoon? Did you (UNINTELLIGIBLE)?
OBAMA: You know, I'm less concerned about me having to wait for my phone call returned than I am the message that I received when I actually got the phone call. I'm going to make this the last question. Go ahead.
QUESTION: The markets are closed right now. What assurances can you give people on Wall Street? Are you going to be reaching out to some people on Wall Street so when Monday comes, we don't see a reaction to the news right now?
OBAMA: I think it's very important that the leadership understands that Wall Street will be opening on Monday, and we better have some answers during the course of the next several days.
QUESTION: What can you say to the people who are watching who work on Wall Street and might find this news a bit alarming, perhaps?
OBAMA: Well, I think what you should say -- here's what I'd say. I remain confident that we will get an extension of the debt limit and we will not default. I am confident of that.
I am less confident at this point that people are willing to step up to the plate and actually deal with the underlying problem of debt and deficits. That requires tough choices. That's what we were sent here to do.
The debt ceiling, that's a formality. Historically, this has not even been an issue. It's an unpleasant vote, but it's been a routine vote that Congress does periodically. It was raised 18 times when Ronald Reagan was president. Ronald Reagan said default is not an option, that it would be hugely damaging to the prestige of the United States and we wouldn't -- we shouldn't even consider it. So that's the easy part. We should have done that six months ago.
The hard part is actually dealing with the underlying debt and deficits. And doing it in a way that's fair. That's all the American people are looking for. Some fairness. I can't tell you how many letters and e-mails I get, including from Republican voters, who say, "Look, we know that neither party is blameless when it comes to how this debt and deficit developed. There's been a lot of blame to spread around. But we sure hope you don't just balance the budget on the backs of seniors. We sure hope that we're not slashing our commitment to make sure kids can go to college. We sure hope that we're not suddenly throwing a bunch of poor kids off the Medicaid rolls so they can't get basic preventive services that keep them out of the emergency room." That's all they're looking for. Some fairness.
Now, what you're going to hear, I suspect, is well, you know, if you -- if the Senate is prepared to pass the cap, cut, and balance bill, the Republican plan, then somehow we can solve this problem. That's serious debt reduction.
It turns out, actually, that the plan that Speaker Boehner and I were talking about was comparable in terms of deficit reduction. The difference was that we didn't put all the burden on the people who were least able to protect themselves, who don't have lobbyists in this town, who don't have lawyers working on the tax code for them. Working stiffs out there, ordinary folks who are struggling every day. And they know they're getting a raw deal. And they're mad at everybody about it. They're mad at Democrats and they're mad at Republicans, because they know somehow, no matter how hard they work, they don't seem to be able to keep up. And what they're looking for is somebody who's willing to look out for them. That's all they're looking for.
And, you know, for us not to be keeping those folks in mind every single day, when we're up here, for us to be more worried about what some funder says or some talk radio show host says, or what some columnist says or what pledge we signed back when we were trying to run, or worrying about having a primary fight, for us to be thinking in those terms instead of thinking about those folks, it's inexcusable.
And the American people are just desperate for -- for folks who are willing to put aside politics just for a minute and try to get some stuff done. So when Nora asked or somebody else asked why was I willing to go along with the deal that wasn't optimal from my perspective, it was because, even if I didn't think the deal was perfect, at least it would show that this place is serious, that we're willing to take on our responsibilities even when it's tough. That we're willing to step up, even when the folks who help get us elected may disagree. And you know, at some point I think, if you want to be a leader, then you've got to lead.
Thank you very much.
BLITZER: All right. So there you have it, the president of the United States making a dramatic bold statement confirming what we knew, that the speaker of the House, John Boehner, had cut off all negotiations, all discussions with the White House on how to reach some sort of agreement, a compromise agreement that would allow the nation's debt ceiling to be raised by the August 2 deadline.
The president also dramatically announcing, in effect, that he is summoning the Republican and Democratic leadership to come to the White House tomorrow morning at 11 Eastern for a meeting to try to deal with the crisis. And it's fair to say this is a crisis right now. The president saying something must be done to prevent the United States from defaulting on its obligations.
Jessica Yellin is our chief White House correspondent. She was there with the president.
I don't remember a time, Jessica, I've seen this president of the United States as angry and as frustrated as he's been over these past 35 minutes since he came to that podium.
JESSICA YELLIN, CNN CORRESPONDENT: Absolutely agree with you, Wolf. He sounded frustrated; he sounded fed up.
The White House no doubt keenly aware of the fact that in Democrats, this is the third time Republicans walked away from what would be a partial deal in these debt negotiations. And the president is saying now that Republicans don't know, basically, how to take yes for an answer. That's his view here tonight.
The president laid out, as you heard, what he thought was the outlines of a deal that he essentially said was more friendly and welcoming to Republicans than to Democrats. You know, we reported all day yesterday on how he was fighting with his own party over it. And so he seemed stymied, astonished that Republicans couldn't even accept a deal that his own party, the Democrats, felt was an outrage to them.
And so now he's up against the wall, facing this reality that they have to find a way to raise this debt ceiling. You heard him essentially say he can accept this McConnell-Reid fallback option. And that he drew a bright line again, saying he would accept no short- term deal, only a deal that goes to the 2012 elections.
So there's been some talk lately, again, that possibly Congress would try to give him a short-term deal. And he said again, not going to happen. So we're going to have to see what evolves over the weekend, Wolf, but the pressure is only mounding. And you can tell here at the White House, not a happy party here, Wolf.
BLITZER: Yes, I'm sure that they're not happy. Let me play a little clip of what the president said to underscore that anger and frustration. Here's the president.
(BEGIN VIDEO CLIP)
OBAMA: I am confident simply because I cannot believe that Congress would end up being that irresponsible that they would not send a package that avoids a self-inflicted wound to the economy at a time when things are so difficult.
Up until sometime early today when I couldn't get a phone call returned, my expectation was that Speaker Boehner was going to be willing to go to his caucus and ask them to do the tough thing, but the right thing. I think it has proven difficult for Speaker Boehner to do that. I've been left at the altar now a couple of times
(END VIDEO CLIP)
BLITZER: Let's go to Capitol Hill. Kate Bolduan, who broke the story for us right at the top, at 6 p.m. Eastern. We're getting reaction already from the leadership, the Republican leadership, from the speaker and the minority leader in the Senate.
BOLDUAN: We are getting reaction. And generally speaking, I'll get to that in one second, Wolf. Generally speaking, it seems that, while the -- while the Senate majority leader, Harry Reid, he's not happy to see that the negotiations are falling apart, he basically says he supports his president, but they all seem to agree now it's time to just work towards an end goal. Get to this path, get together, find a compromise to beat this deadline.
I will tell you, you know, one of the big questions now is what is the path forward. As I said before the president came out, we heard from House Republican sources on this, is that they haven't -- since they are leaving those talks, they don't know what the step forward is. As one person put it, they're making no judgment and no assumption other than the principles that House Speaker John Boehner has laid out all along, those two principles, Wolf, that we talked about so much.
One principle being that the spending cuts in this agreement must be higher -- higher than any amount that the debt ceiling would be raised. And also, the other principal that he's standing by is that no taxes -- there are no tax increases in this.
So to that point, we're now hearing, of course, now the question is where is the path forward? Well, according to my Ted Barrett -- our Ted Barrett -- he's told by a Democratic leadership aide that at least one suggestion would be at this point to get ahead and beat that deadline. That whatever the bipartisan negotiations work on, that the deal could be a plan modeled on the Senate fallback plan that you and I and Jessica, we've all been talking about so much, that McConnell- Reid fallback plan that they were talking about as a last-ditch effort. And that's one suggestion now from a Democratic leadership aide who's saying that might be what they might have to model -- model it at now, at this late stage -- Wolf.
BLITZER: It's very late. I'm not even sure that there would be enough votes in the House of Representatives...
BLITZER: ... to get that.
I want to go back to the White House for a moment. Stand by, Kate, for a second. Jessica Yellin is there. I'm also being told that John Boehner is getting ready -- is that right? -- to make a statement?
He's going to be making a statement very soon. Of course, we'll have that at 7:15 p.m. Eastern, about half an hour or so from now.
Jessica Yellin, you've got some additional information that's just coming in?
YELLIN: Just to add, Wolf, you heard the president say during his first remarks here that he's had cordial relationship with John Boehner, the speaker of the House throughout these negotiations and did mention that he was waiting on a phone call.
I have a little detail about that, according to a Democrat official familiar with these debt negotiations, that the president, that there was an offer out to Speaker Boehner's office, and there had been negotiators waiting for the speaker's response.
The president put a call in to the speaker this morning and had throughout the day been waiting for a reply. When he called the speaker this morning, the president, I'm told, was told the speaker is not available. And he did not get that return call until 5:30 this evening, as you heard him say. So it was a day of waiting here at the White House to see what the speaker would come back with. And ultimately, it was this "no" response. So cordial relations, but no doubt, there will be some frequent tension when they all get together tomorrow, Wolf.
BLITZER: In that letter that the speaker wrote to his colleagues, the Republican colleagues, Jessica -- let me read a little bit of that letter to our viewers. This is from John Boehner.
"The president is emphatic that taxes have to be raised. As a former small businessman, I know tax increases destroy jobs. The president is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won't be there for their generation unless significant action is taken now.
"For these reasons, I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward."
And Mitch McConnell, the Republican leader in the Senate, the minority leader in the Senate, also says that he is ready to move forward with the House leaders and try to come up with some sort of formula.
Is it your sense, Jessica Yellin, that White House officials believe that that failsafe, that fallback position that Harry Reid and Mitch McConnell had been working on, to give the president the authority, in effect, to raise the debt ceiling and let there be resolutions of disapproval in the House and the Senate that would need to be passed, which would be likely, is it your sense that, as of this stage, they have the votes in the House to pass it?
YELLIN: Well, everything so fluid right now, I can't go that far as to say that's what the White House feels. I will tell you that I have been speaking to sources both here and on Capitol Hill. And the feedback I'm getting is that there is no confidence that there's the votes for that, necessarily. So that that is one of the options that everyone is looking at but that there is a high degree of uncertainty that that could pass in the House of Representatives. So they're looking at other options, as well, because McConnell-Reid isn't a certainty to pass in the House of Representatives.
BLITZER: It isn't a certainty. It's possible. It could pass. They usually need 218 votes for majority in the House of Representatives. Right now they need 217 votes, because there two vacant seats in the House of Representatives.
Want to make another point, Jessica?
YELLIN: There's -- I'll tell you that there is a sense here that -- that things have to get worked out overnight. And so I would describe everything as very, very uncertain and fluid. And we can't describe any certainty on any of these plans just yet. There's also, as the president said, a background briefing going on right now, and we'll know a lot more after that happens.
BLITZER: All right. I want you to go to that background briefing, Jessica. Go and we'll have you back, of course.
Let me bring in Gloria Borger, our chief political analyst.
Gloria, give us the big picture right now. Because this is a dramatic moment. Usually, I must -- I must point out, having covered a lot of these negotiations, it's always darkest just before some sort of breakthrough. It's very dark right now.
GLORIA BORGER, CNN POLITICAL ANALYST: Yes, it really is. And I think, Wolf, it's very rare, as you pointed out in the beginning, that we see the president kind of pounding the podium, asking questions like can they say yes to anything? Complaining that he'd been left at the altar a couple of times or that he couldn't get a phone call returned from the House speaker, or summoning the congressional leaders to the White House tomorrow and saying, quote, "I expect them to have an answer."
Now, some people believe that perhaps President Obama should have sounded like this a little bit earlier, because he is now clearly frustrated, at his wit's end and saying, "Look, I really don't believe that we could cut any deal, even though I gave as much as I could, because there was no give on the other side."
It's clear the president is speaking to the independent voters out there, but he was clearly also speaking out of frustration.
I know we're going to hear from John Boehner pretty soon. But, you know, honestly, Wolf, it's very rare that you hear the president like this. And he said, in regard to the fallback plan that Harry Reid and Mitch McConnell have come up with, he rightly said that it puts all responsibility on the president to raise the debt ceiling. It allows Republicans to vote against it and have it still pass.
And he seemed to be saying, "If that's the only way to get this done, I will take responsibility, so long as we do it through 2013."
But Wolf, this is a very different president from the one we saw a week ago, who was still clearly trying to work on some kind of a grand bargain. At this point, I think you'd have to say we're about ready to go to the back-up plan. A Republican on the Hill described it to me as the break-glass moment. I think we may be at the moment to break glass.
BLITZER: It may be a little bit too little, too late. We'll see.
I want to go up to the Hill, Kate Bolduan, who broke this story for us almost an hour or so ago.
Kate, when the president of the United States says, "I'm not ready to play any games any further. This thing has gone on way too long. It's time to resolve this because the nation's credit worthiness is at stake," and he said, "You know what? I'm confident that the debt ceiling will be increased by the August 2 deadline," are folks, the Republican leadership in the House and the Senate, are they agree -- do they agree with the president that they will, in fact, avoid default?
BOLDUAN: They agree. I will tell you, the one thing that was very much emphasized from these House Republican sources that we were speaking with, as well as statements that we're getting from the Senate Republican leader, Mitch McConnell, is that they do seem resolved while one fact.
There is a level of seriousness that we were told amongst Republican leadership on the Hill as well as Democratic leadership on the Hill, that something needs to be agreed to. Some compromise needs to be reached in order to beat this deadline.
However, we should say that we have -- we have been saying this for weeks now, that there seems to be one thing that all groups, all sides have agreed on, is that something needs to be done before this August 2 deadline. Default, in the minds of these leaders at the White House and on the Hill, is not an option. But we continue to see these discussions, all the details that -- we filter out these discussions, they look like they're working towards a deal and then things break down. This framework that was laid out of this deal that they were working for, looking toward before things began to unravel, was a -- was a very significant deal. They called for significant changes to entitlement -- entitlement programs. Medicare, Social Security, the way Social Security benefits are calculated. They have the framework for tax reform that Republicans, of course, thought was quite healthy. They thought they had reached agreement on these things. They were still discussing that enforcement mechanism, Wolf, that we've been talking about and how -- how it's kind of like a penalty, if you will. Keeping -- to keep everyone at the table to work towards that tax reform.
There was some disagreement and they're still seeming to work out that. But they seem -- they had the idea, the Republican sources, that the speaker's office that the House speaker, they were working towards an agreement. And they believe that when the Gang of Six came out to unveil the plan for a long-term deficit reduction, that the White House position changed, and that's when they believe things began to unravel.
And that's when -- well, now we know at this point House Speaker John Boehner does not think, in his view, that these negotiations, these discussions are productive. And so he is pulling out, and he's now changing his focus to Capitol Hill.
BLITZER: Well, let's see if he shows up together with the other leaders tomorrow morning at 11 a.m. Eastern at the White House.
I want you to listen, and I want our viewers to listen how the president of the United States just moments ago summoned the congressional leadership to the White House.
(BEGIN VIDEO CLIP)
OBAMA: We have now run out of time. I told Speaker Boehner, I've told Democratic leader Nancy Pelosi, I've told Harry Reid, and I've told Mitch McConnell, I want them here at 11 tomorrow.
We've run out of time, and they are going to have to explain to me how it is that we are going to avoid default. And they can come up with any plans that they want and bring them up here, and we will work on them.
The only bottom line that I have is that we have to extend this debt ceiling through the next election into 2013.
(END VIDEO CLIP)
BLITZER: The president had an ambitious agenda. Jessica Yellin still with us over at the White House in the briefing room. She was there when the president made that dramatic announcement.
I assume, Jessica, that there's no way the Republican and Democratic leadership, certainly not the Democratic leadership, but the Republican leadership, is going to say, "Thanks, but no thanks, we're not coming at 11 a.m. tomorrow morning." I assume they will be here.
YELLIN: I haven't asked, but I assume they will be here. All sides want to get the debt ceiling raised, Wolf, and it's just a question of how.
I have two additional pieces of information. This -- one coming from a congressional aide in response to the question you asked me: is the McConnell-Reid plan the operating plan? And I'm told that that is the basis for discussions this weekend, that the McConnell/Reid plan is the foundation and what they will build off of in their conversations moving forward.
And secondly, a bit more on this tick-tock. I had reported earlier that the president called Speaker Boehner this morning, was told the speaker is unavailable. And the president did not hear back from him until 5:30 p.m. tonight. According to a Democrat familiar with the debt talks, Speaker Boehner told the media that the deal was off before he called the president. So -- and told him the same.
So, that would no doubt add to the president's degree of frustration and fed-upness that we saw on display in this room just a few moments ago, Wolf.
BLITZER: Yes. I guess they're not going to be playing golf anytime soon, these two gentlemen. But there's no doubt that if there would -- at least what I've heard in the past, is that if it were just the president and the speaker, they probably could have worked out some sort of compromise. But the speaker has to worry about a lot of really conservative Tea Party activists within his own caucus in the House of Representatives, and he simply didn't have the votes to allow any what they call revenue increases or tax increases. They didn't have the votes in the House Republican Caucus.
YELLIN: Well, that's true in the sense that he doesn't have necessarily the votes from his own Republicans, but what you will hear back from Democrats is, in this instance, if he wants to get the debt ceiling raised, then he has to negotiate and create space for Democrats to vote yes.
And they would argue that he has not been willing to add enough into this package to make it -- to sweeten it for Democrats to say yes to it. And that is ultimately why this deal has broken down, and that if -- in a leadership moment he would have been willing to do that. That's the Democrats' point of view.
BLITZER: Let's get some reaction, Jessica. Stand by for a moment. Grover Norquist is joining us on the phone right now. He's a powerful player behind the scenes here in Washington.
Grover, give us your reaction to what we've just heard, the dramatic announcement from the speaker. He was breaking off negotiations. The president responding, "Well, I'm summoning all of you to the White House tomorrow morning." Give us your reaction.
GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM (via phone): Look, the president of the United States has known for seven months that Boehner was willing to cut a deal on the following basis. If the president wanted $2.5 trillion and authority to borrow more, then he had to come up with $2.5 trillion in spending restraint without a tax increase.
And that's been the rule since the beginning. He's known that. If he wants to close down the government because he can't get a tax increase, he needs to make that case to the American people.
BLITZER: Are you ready, together with your supporters, Grover Norquist, to support what seems to be the only option right now, this fail-safe, fallback position, that Mitch McConnell and Harry Reid have been working on that would, in effect, give the president the authority to raise the debt ceiling?
NORQUIST: I would certainly argue that it is better to let the president make this decision all by himself, as long as there's not a tax increase and not phony cuts.
BLITZER: So, there won't be any tax increases in the Reid- McConnell compromise position, so that's better than allowing the country go into default. Because as you know, some Tea Party activists disagree. They say let the country go into default instead of allowing the Reid-McConnell compromise fail-safe position to go forward.
NORQUIST: I understand the frustration some people have, but I think if they think it through, they'd realize that giving the president the power to have complete control over the budget, however diminished, would not end well.
Look, this is not -- not the last time we're going to discuss this. There's an election in 2012. If you believe the country is with you, as I do -- I believe the country wants lower taxes and less spending -- let's go to the electorate and say, "Let's get a different president, a different Senate." The president's free to argue, "Let's get a different House so we can raise taxes."
BLITZER: So, in other words, you're -- what you're saying is you'd fully appreciate and agree with the president, you agree with the speaker, you agree with the Democratic leadership that a default would be a disaster for the United States and it must be avoided at all costs?
NORQUIST: Look, I assume it's a disaster. I think there's no reason to assume otherwise. It is gambling with the economics of the country to get that far. We need to get to where, first of all, we can cut some spending, not raise taxes. As much as you can get is as much as we should fight for.
But, again, rather than close the government down or go into default, let's take it to the American people, go into the next election, and fix things then.
BLITZER: Grover Norquist is the president for Americans for Tax Reform. He's a powerful player in all of this. And you just heard him effectively say, yes, he agrees with the president of the United States, default must be avoided. If absolutely essential, the best compromise would be to allow that proposal that Mitch McConnell and Harry Reid have been working on to go forward, and then fight it out next year in the presidential election, the congressional elections, elections throughout the country.
This is one of those dramatic days, one of those dramatic moments a lot of us will remember. It's not over with by any means. There's going to be negotiations, an effort tomorrow morning, 11 a.m., when the president of the United States meets with the leadership. Here's what he said just a little while ago.
(BEGIN VIDEO CLIP)
OBAMA: Or alternatively, how serious are you actually about debt and deficit reduction? Or do you simply want it as a campaign ploy going into the next election?
Now, in terms of where we go next, here's the one thing that we've got to do. At minimum, we've got to increase the debt ceiling. At minimum. I think we need to do more than that.
But as I've said before, Republican Leader McConnell in the Senate put forward a plan that said he's going to go ahead and give me the responsibility to raise the debt ceiling. That way folks in Congress can vote against it, but at least it gets done. I'm willing to take the responsibility. That's my job. So, if they want to give me the responsibility to do it, I'm happy to do it.
But what we're not going to do is to continue to play games and string this along for another eight, nine months and then have to go through this whole exercise all over again. That we're not going to do.
YELLIN: Tonight, Mr. President, can you assure the American people that they will get their Social Security checks on August 3? And if not, who's to blame?
OBAMA: Well, when it comes to all the checks, not just Social Security -- veterans, people with disabilities, about 70 million checks are sent out each month -- if we default, then we're going to have to make adjustments. And I'm already consulting with Secretary Geithner in terms of what the consequences would be.
We should not even be in that kind of scenario. And if Congress and, in particular, the House Republicans, are not willing to make sure that we avoid default, then I think it's fair to say that they would have to take responsibility for whatever problems arise in those payments.
Because -- let me repeat, you know, I'm not interested in finger pointing, and I'm not interested in blame. But I just want the facts to speak for themselves. We have put forward a plan that is more generous to Republican concerns than a bipartisan plan that was supported by a number of Republican senators, including at least one that is in Republican leadership in the Senate.
(END VIDEO CLIP)
BLITZER: Very dramatic moment in these negotiations to raise the nation's debt ceiling.
That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.
"JOHN KING USA" starts right now.