3:00pm

Mon July 11, 2011
Politics

Does The Deficit Impasse Look Insoluble?

Transcript

ROBERT SIEGEL, host:

Well, joining us now to talk about what all of this means is NPR national political correspondent Mara Liasson. Hi, Mara.

MARA LIASSON: Hi, Robert.

SIEGEL: What's happening here? Is all this theater or did today's dueling news conferences actually serve some purpose?

LIASSON: Well, it's theater in the sense that it didn't seem to do anything to advance what was happening inside the room, which, as far as we understand right now, is very little. The president continues to appeal to his target audience, which is independent voters, with the message: I'm ready to compromise. I'm ready to tell my Democrats that entitlements have to be reformed - in the case of Medicare, in order to help reduce the deficit; in the case of Social Security, to strengthen it for future generations. So he is trying to make clear he's willing to move to the middle, do something about his side's sacred cows, but the Republicans won't budge.

SIEGEL: And Speaker Boehner?

LIASSON: And then Speaker Boehner on the other hand is playing to his own conservative base, his anti-tax base. He did try briefly to sell the idea of a grand bargain, but he gave up on Saturday because it would involve the Republicans moving even temporarily on taxes. And he was back to his old talking points today.

SIEGEL: The grand bargain would have been several trillion dollars in cuts, including some tax increases.

LIASSON: Including some tax increases, and that didn't fly.

SIEGEL: Do we have a clear sense at this point of what President Obama's bottom line is and what the Republicans' bottom line is?

LIASSON: Well, we know the president and Democratic leaders in Congress don't want to touch Medicare benefits. They're willing to squeeze Medicare in some ways but not benefits. We also know that Democrats and the president insist on some kind of tax hikes in revenue increases if they're going to agree to deep spending cuts. And the latest ratios they were discussing in the talks were about 4-1 or 5-1, spending cuts to tax hikes.

SIEGEL: Mm-hmm.

LIASSON: For Republicans, we've heard many say no tax increases at all, not even closing loopholes on corporate jet owners. Other times, they say no net tax hikes, which would presumably make room for closing some loopholes with some offsetting tax cuts, such as the one the president himself wants, which is an extension of the Social Security payroll tax cut that he negotiated in December. Others - Republicans say no tax rate hike.

SIEGEL: Mm-hmm.

LIASSON: No one is talking about a rate hike, at least in the short term. So I don't think we're crystal clear about where their lines on the sand are.

SIEGEL: Well, one reading of this is that it's just insoluble. I mean, you can't reconcile those two positions.

LIASSON: Well, that's a perfectly fair - that is a perfectly fair reading of this. At the moment, it doesn't look like there's a path to solving this problem, but the markets haven't weighed in yet. And many veterans of past budget fights think there will have to be a negative market reaction in order to break this impasse.

SIEGEL: As you've said, President Obama has his eye on independent voters. Speaker Boehner has his eye on the conservative Republican base. Is it possible to tell who is actually winning politically so far in this?

LIASSON: I think everybody is losing. The speaker of the House definitely loses. He looks like he couldn't lead his troops this weekend. He floated this bargain and it got shut down, and he immediately retreated. President Obama is the one that stood to gain the most from a deal. And without one, you'd have to say he's just stuck with a deteriorating recovery and more evidence that he wasn't able to bridge differences and make government work. One thing I was struck by in his press conference is where he decried the political process where folks are rewarded for saying irresponsible things to win elections - he often says that.

SIEGEL: Mm-hmm.

LIASSON: But he said, so when we are actually in a position to try to do something hard, we haven't always laid the groundwork for it. And even though everyone said they wanted deficit reduction, both sides say they want tax reform that lowers rates and broadens the base, neither leader laid the groundwork to do this huge grand bargain. They cooked this up on the golf course two weeks ago. They tried to sell it to their respective bases. But it strikes me that something of this magnitude and complexity needed a lot of groundwork, a lot of explaining and education to sell it to the country and the Congress.

SIEGEL: I want you to define one other element here, which was the sort of package that the Biden group was negotiating, the smaller deal. What's that understood to be?

LIASSON: That's understood to be weighted towards spending cuts, a lot of spending cuts. But the Democrats were saying if you're going to do that much spending cuts, we need some tax increases. We need some loophole closings. And there are some loophole closings the Republicans were willing to consider if they got tax cuts that offset them; some, they weren't.

They had not gotten to $2 trillion, which is what the Republicans say they want. Republicans were also balking at defense cuts.

SIEGEL: Mm-hmm.

LIASSON: So they were still a far way away. That deal wouldn't have big structural reforms in Medicare. It wouldn't solve the deficit over the long term. It would take a bite out of the problem.

SIEGEL: And so the talks continue this week.

LIASSON: Talks continue.

SIEGEL: Thank you, Mara.

LIASSON: Thank you.

SIEGEL: NPR national political correspondent Mara Liasson. Transcript provided by NPR, Copyright National Public Radio.

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