Fox News Sunday Snippets: July 10, 2011

Speaker Boehner step back and reaction

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase."

- Speaker John Boehner

"The President believes that solving our fiscal problems is an economic imperative. But in order to do that, we cannot ask the middle-class and seniors to bear all the burden of higher costs and budget cuts. We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree.

"Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington. The President believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so tomorrow, he will make the case to congressional leaders that we must reject the politics of least resistance and take on this critical challenge."

- White House communications director Dan Pfeiffer

"The President and Vice President have encouraged a bipartisan, balanced approach to lower the deficit as we lift the debt ceiling. As we work to reduce the deficit, we must do so in a way that creates jobs, ensures tax fairness for the middle class, respects our seniors and educates our children. Whatever our views, the August 2nd deadline is certain and we cannot walk away from our obligation to the American people."

- House Minority Leader Nancy Pelosi

"Like the Speaker, Sen. McConnell has consistently said that we should cut Washington spending without raising taxes on job creators, particularly in the middle of a jobs crisis. And he remains concerned with the Democrats' unwillingness to take steps to protect entitlement programs from bankruptcy, but hopes the President will be able to use Sunday night's meeting to encourage them to take action on needed reforms."

- Don Stewart, spokesman for Senate Minority Leader Mitch McConnell

"I am disappointed that Republicans are unable to work with us to take a historic step forward that would have dramatically reduced our long-term deficit. We asked Republicans to consider a balanced approach that would have required shared sacrifice, but they would not. We still need to make sure we avert the economic catastrophe that would occur if we were to let America fail to pay its bills for the first time in our history, and I am confident that we will. Americans have a right to expect their leaders to rise above partisanship and do the right thing for our economy and the middle class."

- Senate Majority Leader Harry Reid

"It's disappointing that the Republican fixation with protecting tax breaks for corporate special interests and the very wealthy prevented them from agreeing to a balanced and broad deficit reduction plan to help our economy and our country."

- Chris Van Hollen, Ranking Democratic Member of the House Budget Committee

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Top Headlines

The Washington Post

Deficit talks scaled back

Paul Kane and Lori Montgomery

House Speaker John A. Boehner abandoned efforts Saturday night to cut a far-reaching debt-reduction deal, telling President Obama that a more modest package offers the only politically realistic path to avoiding a default on the mounting national debt.

On the eve of a critical White House summit on the debt issue, Boehner (R-Ohio) told Obama that their plan to "go big," in the speaker's words, and forge a compromise that would save more than $4 trillion over the next decade, was crumbling under Obama's insistence on significant new tax revenue.

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," Boehner said in a statement released less than 24 hours before the White House meeting was scheduled to begin. "I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the [Vice President] Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase."

Boehner's decision leaves negotiators reexamining a less-ambitious framework - aimed at saving roughly $2.4 trillion over the next decade - that had been under discussion between Biden and a bipartisan group of lawmakers. But that framework is hardly complete; the group broke up last month when Republicans walked out over the tax issue.

The sweeping deal Obama and Boehner had been discussing would have required both parties to take a bold leap into the political abyss. Democrats were demanding more than $800 billion in new tax revenue, causing heartburn among the hard-line fiscal conservatives who dominate the House Republican caucus. Republicans, meanwhile, were demanding sharp cuts to Medicare and Social Security, popular safety net programs that congressional Democrats have vowed to protect.

New York Times

Deficit Talks Scaled Back Over Tax Increases

Carl Hulse

Citing differences over tax revenues, House Speaker John A. Boehner said on Saturday night that he would pull back from joint efforts with President Obama to reach a sweeping $4 trillion deficit-reduction plan tied to a proposal to increase the federal debt limit.

On the eve of a second round of high-level bipartisan talks set for Sunday, Mr. Boehner issued a statement saying he would now urge negotiators to instead focus on crafting a smaller package more in line with the $2 trillion to $3 trillion in spending cuts and revenue increases negotiated earlier by Vice President Joseph R. Biden Jr.

“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Mr. Boehner said. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”

The decision was a major reversal for Mr. Boehner, a veteran Congressional deal-maker who along with Mr. Obama had been the major advocate for seeking a far-reaching deal that would have combined a debt limit increase with substantial spending cuts, significant changes in social programs like Medicare, Medicaid and perhaps Social Security, and as much as $1 trillion in new revenues. Following a secret meeting between the two last weekend, Mr. Obama went public with his own call for a broad package.

The White House, in its own statement, followed Mr. Boehner’s announcement with the suggestion that the president would try to change Mr. Boehner’s mind in their Sunday session.

“Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington,” Dan Pfeiffer, the White House communications director, said. “The president believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so tomorrow, he will make the case to Congressional leaders that we must reject the politics of least resistance and take on this critical challenge.”

But the prospect of getting the bulk of his own Republican majority behind a $4 trillion, 10-year agreement was looming as a very heavy political and policy lift for the speaker who is still in his first year in the position.

Politico

Under pressure from right, John Boehner steps back on debt deal

House Speaker John Boehner, under pressure from the right and facing resistance from his own deputies, backed away Saturday from a bold $4 trillion deficit-reduction package that he once hoped would resolve the August debt ceiling crisis and give a shot in the arm to a lagging economy.

Tax policy disputes were at the center of the collapse, including differences with the White House over President Barack Obama’s demand that future tax reforms must maintain or increase the progressivity of the tax code. But for days Boehner has been under relentless pressure from conservatives to step away from the deal, which Saturday’s Wall Street Journal editorial writers dubbed “Boehner’s Obama Gamble.”

The White House signaled it will continue to make its case for the plan in a meeting Sunday evening with congressional leaders, including Boehner. But without the speaker’s support, it has no chance of being implemented, and the focus is expected to turn toward a smaller package more in the range of $2.4 trillion.

Boehner spoke with the president prior to making his announcement Saturday evening and continues to demand that the deficit reduction match dollar-for-dollar whatever debt ceiling is agreed to prior to the August 2 deadline set by Treasury.

That will not be an easy matter, given the Republican hard line against new tax revenues. Weeks of negotiations led by Vice President Joseph Biden have identified deficit-reduction savings in the range of $1.7 trillion to $2 trillion in savings. But that leaves a gap of $400 billion to $700 billion to be filled, and Democrats have argued strongly that revenues must be part of the mix.

Reuters

Obama faces new obstacles in high-stakes debt talks

BIG DIFFERENCES REMAIN

Boehner and Obama, whose 2012 re-election prospects are tightly linked to U.S. economic and fiscal health, spoke by phone on Saturday and failed to resolve key differences over taxes and entitlement spending.

But after Boehner's announcement, the White House said Obama would not "back off" his efforts toward a comprehensive deal and suggested he might try to change the Republican's mind. Sunday's session is set for 6 p.m. EDT.

"Both parties have made real progress thus far," White House communications director Dan Pfeiffer said. "Tomorrow, he will make the case to congressional leaders that we must ... take on this critical challenge."

Obama had summoned congressional leaders to lay out their "bottom-line" demands for what the White House has billed as vital phase in the quest for a sweeping budget agreement.

There had been growing pressure from rank-and-file lawmakers who must approve anything hammered out in closed-door White House talks. Critics on the left and the right had voiced unease at some options on the table, and they are now expected to dig in their heels even further.

The biggest obstacles to an agreement remain.

Democrats want to shield popular domestic programs from huge cuts and say that any deal must include increases in tax revenue, including an expiration of Bush-era tax cuts on wealthier Americans.

Republicans -- under pressure from Tea Party conservatives -- reject any increased taxes and want curbs on popular benefit programs such as Medicare, Medicaid and Social Security

Washington Post

Boehner’s decision means an opportunity lost

Dan Balz

House Speaker John Boehner’s surprise announcement late Saturday that he was abandoning efforts to reach a comprehensive budget agreement brings a sudden end to what may have been the best opportunity in years to deal with the country’s looming fiscal crisis.

Boehner pulled the plug on talks with the White House on a package that would have called for cuts in major entitlements programs as well as new tax revenues. It was a stunning decision, coming a day before President Obama and congressional leaders were due to resume their negotiations.

But though the timing was a surprise, the decision also may have been utterly predictable. Facing a potential revolt in his caucus, one that was growing as more details about the components of the possible agreement were leaking out, Boehner apparently decided to cut his losses now rather than risk a major insurrection and possible rejection by his party.

What comes next, after what could be some rancorous talks, will be a far more limited agreement, one that will get the government through the deadline when its borrowing authority expires, but one that still leaves for the future what to do about Social Security, Medicare, Medicaid and revenues in ways that put the nation’s long-term fiscal house in order.

New York Times

Presidential Candidates Warn About Debt Deal

JEFF ZELENY and CARL HULSE

Representative Michele Bachmann of Minnesota seized on the issue and used the first television commercial of her campaign to highlight her opposition to raising the debt ceiling. She drew enthusiastic applause on Saturday as she amplified her position.

“It’s time for tough love,” Mrs. Bachmann told supporters at a rally. “Don’t let them scare you by telling you that the country’s going to fall apart.”

Tim Pawlenty, a former Minnesota governor, who was critical of the deal brokered this year between Mr. Obama and Mr. Boehner that averted a government shutdown, said he was not convinced of the dire consequences predicted by Democrats if no deal was reached and the government lost its authority to borrow on Aug. 2.

“I hope and pray and believe they should not raise the debt ceiling,” Mr. Pawlenty told voters here last week. “These historic, dramatic moments where you can draw a line in the sand and force politicians to actually do something bold and courageous are important moments.”

On the presidential campaign trail, Representative Ron Paul of Texas said Republicans should not accept any deal that includes a tax increase, calling it a “ploy.” While Mrs. Bachmann has suggested that virtually no bipartisan deal would be acceptable, Mr. Pawlenty told voters last week that “if it comes to a point where they feel that they must,” he said a balanced-budget amendment was an essential trade-off.

Mitt Romney, a former governor of Massachusetts, has said he would agree to increasing the debt limit only if a deal was “accompanied by a major effort to restructure and reduce the size of government.” Jon M. Huntsman Jr., a former governor of Utah, has said spending cuts must be equal or greater than the value of any debt ceiling increase but told reporters Saturday in Florida: “I have every confidence that cooler heads are going to prevail.”

Wall Street Journal

Government to Tackle Problem Tax Policies

JOHN D. MCKINNON

Ideas for closing the government's yawning fiscal deficits keep getting more creative and complicated.

One idea being floated would basically try to plug a couple of slow leaks that have developed over the years in the federal government's finances. These arise from two related tax policies, the alternative-minimum tax and the Bush tax cuts.

The AMT is a tax increase that Congress keeps postponing. The Bush tax breaks are a set of tax cuts that Congress keeps extending. Both actions add significantly to annual deficits.

Now, the Obama administration and many lawmakers apparently would like to solve both of those political problems once and for all.

But fixing them costs more money, and doing it in a package that is supposed to be reducing deficits, rather than increasing them, is going to be tricky to say the least.

The AMT was originally designed to hit high-income people who accumulate so many deductions and other breaks that they don't pay much tax under the regular rules. But the AMT was never indexed for inflation. Now, it threatens to hit tens of millions of middle-class taxpayers each year. So Congress keeps patching the rules to exempt most people who would otherwise be hit. This annual exercise has gotten brutally expensive -- the patch Congress passed in December to get us through 2011 cost $137 billion.

The Washington Post

Job growth takes a dive in June

Job growth came to a near-halt in June, according to surprisingly grim new data released Friday that raise doubts that the economy will bounce back from its spring lull soon.

Midway through a year that began with expectations that the ailing U.S. economy would finally take off, the nation is stuck in a muddle, growing too slowly to keep the jobless rate from rising, let alone to put some of the 14 million people looking for work back to earning paychecks. The odds that job creation will take off in the remainder of the year look slimmer with every new piece of data.

The 18,000 jobs U.S. employers added to their payrolls in June was less than a fifth of what economists had expected and far below the 125,000 or so needed to keep up with an ever-growing population. The unemployment rate rose to 9.2 percent from 9.1 percent.

"This does throw a lot of cold water on the idea that we'll get a quick rebound," said Michael Hanson, a senior economist at Bank of AmericaMerrill Lynch.

The jobs survey was exceptionally bleak even in its details. Job growth in April and May was revised downward by a combined 44,000 positions. Temporary employers, often a leading indicator of future activity in the labor market, cut 12,000 jobs. And roughly 272,000 Americans dropped out of the labor force, perhaps out of frustration with their job prospects. The unemployment rate would have risen even higher had they continued their job hunts.

A broader measure of unemployment - including those who have given up looking for jobs out of frustration and those with part-time work who want a full-time job - rose to 16.2 percent from 15.8 percent.

Associated Press

Weak hiring report makes debt limit an even harder sell for Obama

WASHINGTON -- Immersed in an intense struggle to cut the national debt, President Barack Obama faces a dilemma that will stay with him even if he succeeds in striking a grand deal with Congress: convincing Americans that the entire effort will do anything to create desperately needed jobs.

Obama ties deficit reduction to jobs, on the basis that trying to balance the nation's books will promote economic stability and give businesses more confidence to hire. But that's a tough sell to the millions of Americans out of work right now. And the communications problem just got harder.

The latest snapshot of the economy, out Friday, was a body blow that showed employers added a meager 18,000 jobs in June. The leaders of the country, meanwhile, are consumed with negotiating a major debt-reduction deal built upon cutting spending and raising taxes. It is not directly aimed at boosting jobs.

Obama's challenge is to link all this in meaningful terms and to get faster results. At stake are the country's economic recovery and his re-election chances.

In his weekly radio and Internet address Saturday, Obama said that it will take a "balanced approach" that mixes limits on domestic programs and the Pentagon, curbs to Medicare and elimination of some tax breaks for the wealthy.

Bloomberg

Democrats Press Obama for Stimulus in Debt Deal After Jobs Data

July 9 (Bloomberg) -- Democrats pressed for some form of economic stimulus in the debt deal President Barack Obama is negotiating with Republicans following a U.S. Labor Department report yesterday showing job growth slowing.

Senator Charles Schumer of New York, the chamber’s third- ranking Democrat, called for an “immediate jolt” to the economy by extending and enlarging a one-year payroll-tax cut that’s set to expire Dec. 31. He asked for action “as quickly as possible by including it in the final debt-limit agreement.”

Jared Bernstein, until recently Vice President Joe Biden’s chief economic adviser, predicted the White House would step up efforts to include in the debt deal additional infrastructure spending or a new temporary payroll tax reduction.

In addition to continuing a 2 percentage-point break in the employee payroll tax, the White House may push for an equal cut in the employers’ part of the levy, according to a Democratic official.

“It would be a mistake for them not to ratchet up the urgency on the jobs side, given the labor market really appears to be in a stall,” said Bernstein, now a senior fellow at the Center for Budget and Policy Priorities in Washington. “It’s not something you can ignore.”

The Labor Department reported the unemployment rate in June unexpectedly climbed to 9.2 percent, the highest this year. Employers added 18,000 jobs, the weakest growth since September 2010. Payroll growth for May also was revised downward, to 25,000.

Wall Street Journal

ATF Chief Denies Blame for Gun-Tracking Program

The head of the Bureau of Alcohol, Tobacco, Firearms and Explosives told congressional investigators he wasn't to blame for a troubled gun-tracking operation, saying he wasn't aware of its details until after public questions had been raised.

Kenneth Melson, the acting ATF director, in his first detailed comments on the gun program, contradicted testimony and documents previously released by lawmakers suggesting he was more familiar with the initiative known as Fast and Furious.

Sen. Charles Grassley and Rep. Darrell Issa, both Republicans, released details Wednesday of the Melson interview, which took place Monday, in a letter to Attorney General Eric Holder.

The Fast and Furious operation was designed to monitor purchases by people suspected of buying firearms for others—in particular drug cartel gangs in Mexico. But many of the arms turned up at crime scenes in the U.S. and Mexico.

Messrs. Issa and Grassley say the ATF should have known it couldn't track the weapons and that firearms ended up in the hands of deadly drug squads.

Fox News

Justice Department Obstructing 'Fast and Furious' Gun Probe, ATF Director Says

William Lajeunesse

The Justice Department is obstructing the congressional investigation of a U.S. law enforcement operation intended to crack down on major weapons traffickers on the Southwest border, according to the embattled leader of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

Ken Melson, the acting director of the ATF, lobbed the accusation when he sneaked in for an interview with congressional investigators on July 4, two days ahead of his scheduled interview with the inspector general about the operation known as "Fast and Furious," Fox News has learned.

"If his account is accurate, then ATF leadership appears to have been effectively muzzled while the DOJ sent over false denials and buried its head in the sand," Rep. Darrell Issa, chairman of the Oversight and Government Reform Committee, said in a letter Tuesday to Attorney General Eric Holder. "That approach distorted the truth and obstructed our investigation."

Associated Press

Panetta: US within reach of defeating al-Qaida

KABUL, Afghanistan (AP) -- Al-Qaida's defeat is "within reach," U.S. Defense Secretary Leon Panetta said Saturday during his first visit to Afghanistan as Pentagon chief. He said eliminating as few as 10 of the group's top figures could cripple its ability to strike the West.

Panetta's assessment could stoke the debate in Washington over how soon to pull the U.S. military from the land where Osama bin Laden's network launched the attacks of Sept. 11, 2001, against the United States. Some question why a continued military commitment is necessary if al-Qaida's end is in sight, given that it was the reason the U.S. began the war.

Although not as specific as Panetta about what it will take to break al-Qaida, the top American commander in Afghanistan said in a separate interview that he agrees the group is on the ropes.

NY Times

U.S. Is Deferring Millions in Pakistani Military Aid

The Obama administration is suspending and, in some cases, canceling hundreds of millions of dollars of aid to the Pakistani military, in a move to chasten Pakistan for expelling American military trainers and to press its army to fight militants more effectively.

Coupled with a statement from the top American military officer last week linking Pakistan’s military spy agency to the recent murder of a Pakistani journalist, the halting or withdrawal of military equipment and other aid to Pakistan illustrates the depth of the debate inside the Obama administration over how to change the behavior of one of its key counterterrorism partners.

Altogether, about $800 million in military aid and equipment, or over one-third of the more than $2 billion in annual American security assistance to Pakistan, could be affected, three senior United States officials said.

This aid includes about $300 million to reimburse Pakistan for some of the costs of deploying more than 100,000 soldiers along the Afghan border to combat terrorism, as well as hundreds of millions of dollars in training assistance and military hardware, according to half a dozen Congressional, Pentagon and other administration officials who were granted anonymity to discuss the politically delicate matter.

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Sunday Guests – July 10, 2011

•“Fox News Sunday,” 9 a.m.: Senate Minority Leader Mitch McConnell, Kentucky, Democratic Caucus Vice Chairman Xavier Becerra, California, Republican; Sen. Jim DeMint, South Carolina

•ABC’s “This Week,” 9:30 a.m.: Bill Daley, President Barack Obama’s chief of staff; Christine Lagarde, head of the International Monetary Fund.

•CBS’ “Face the Nation,” 11:30 a.m.: Treasury Secretary Timothy Geithner; Sen. Jeff Sessions, Alabama Republican; Sen. Bill Nelson, Florida Democrat.

•CNN’s “State of the Union,” 8 a.m.: Rep. Kevin McCarthy, California Republican; Rep. Chris Van Hollen, Maryland Democrat; Republican presidential candidate Rick Santorum; NASA Administrator Charles Bolden; NASA scientist James Garvin.

•NBC’s “Meet the Press,” 9 a.m.: Geithner; Republican presidential candidate Tim Pawlenty, Mort Zuckerman

C-SPAN’s “Newsmakers” This weeks "Newsmakers guest is REP. JIM JORDAN, R-Ohio, Republican Study Committee Chairman