What comes next in a universe where the government works
On Feb. 5, 2011, the president signed the Economic Growth and Deficit Reduction Act of 2011 into law. The legislation lifted the employer-portion of the payroll tax for a year, approved more than $50 billion in infrastructure investments, and cut the deficit. The markets cheered the move, and employers, realizing that consumers were about to have more money in their pockets and that hiring new employees had suddenly become a bargain, quickly moved to expand their labor forces. It was a coup not just for the president, but for the new speaker of the House.
Six days after the 2010 election, John Boehner and Mitch McConnell were invited to the White House to meet with President Obama. When they got there, they found Obama and Pete Rouse sitting at a table with a single piece of paper in front of them. It was a clipping of Gov. Mitch Daniels's September op-ed proposing a conservative stimulus plan. "Congratulations on your win last week," said the president. "You really thumped us. What do you think of this?"
McConnell didn't think much of it. He wanted to talk about the Bush tax cuts. But Boehner was more intrigued. The House was about be his responsibility, after all. If he could begin by passing a massive payroll tax cut that also froze salaries for federal employees and maybe even made some progress on the deficit? It would be quite a way to introduce himself to the American people. And he'd been struck by a column he'd read a few weeks back quoting Bernanke's advice to Japan in the early Aughts: Bernanke had told them to pair quantitative easing with a big tax cut to make sure the money got into the economy. Boehner had always liked the Fed chairman, and figured if it made sense to Bernanke, it probably made some sense.
A few hours after the meeting, Boehner directed an aide to quietly come up with some numbers. There were two conditions, Boehner said. First, the deficit has to come down. Second, it has to come down in at least a couple of ways Democrats really don't like.
The second condition was easier than the first. They needed about $400 billion, and it all needed to come from spending cuts. On the bright side, they could take 10 years to get the money. It seemed possible. You could freeze discretionary spending, take back some TARP and stimulus funds, make a one-time cut to federal-employee pay, and try a couple of other small things. Boehner liked it, particularly the cut on federal-employee pay. He confidentially sent the proposal up to the president, knowing he'd veto some of the spending cuts.
But that wasn't the deal the president wanted. He was willing to buckle on most of them. In return, he wanted more infrastructure spending. Boehner agreed; he had plenty of Republican governors and even congressmen asking him to get some infrastructure-funding moving. But he wanted Davis-Bacon suspended. Privately, the president told him that he'd do it if he could, but there was no way to get Democrats on board with it. He had a counter-offer, though: He'd set up an accelerated process for getting projects past environmental regulations, such that many of them could be certified after-the-fact, rather than waiting around for the paperwork to clear before workers could break ground. Boehner mulled it over for a day, and called the White House back. If they could get Harry Reid to agree, he'd do it.
| November 3, 2010; 9:47 AM ET
Categories: 2010 Midterms
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