Image: Barack Obama
Paul Sancya  /  AP
President Barack Obama speaks in front of a Jeep Wrangler at Chrysler Group's Toledo Assembly complex in Toledo, Ohio on June 3.
updated 6/5/2011 2:03:42 PM ET 2011-06-05T18:03:42

The threat of a first-ever default by the federal government is pushing President Barack Obama and Republicans toward a sweeping agreement to cut government spending and increase the Treasury's borrowing authority. Yet a perennial partisan struggle over the Medicare program for seniors' health care drives them apart.

Remarkably, the two sides seem determined to pursue both accord and discord simultaneously, sparing the still-wobbling economy from threatened calamity while preserving Medicare as a political issue in the 2012 elections.

"I'm willing. I'm ready. It is time to have the conversation" about deficit cuts and the debt limit, said House Speaker John Boehner, urging Obama to become personally involved. "It is time to play large ball, not small ball."

Story: Democrats meeting with Obama on deficits
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But a few days later, House Democratic leader Rep. Nancy Pelosi said, "I could never support any arrangement that reduced benefits for Medicare. Absolutely not," she told CBS television's "Face The Nation," emphasizing a position she and other Democrats had laid out at their own meeting with Obama.

Given the sheer size of Medicare, nearly $500 billion a year to provide health care coverage for the elderly, any deal on reducing future deficits is likely to include savings from the program, if not the benefit cuts many Democrats oppose.

But if any Republican thought that the White House and congressional Democrats might agree to even a temporary cease-fire on Medicare, they may want to reconsider.

Boehner and fellow House Republicans had scarcely left a White House meeting with Obama on Wednesday when presidential press secretary Jay Carney told reporters that Obama "doesn't believe that we need to end Medicare as we know it, to dismantle the program as it currently exists, in order to achieve significant deficit reduction."

Story: GOP presses Obama on spending cuts, Medicare

Within seconds, he said the Republican plan for Medicare "puts too much of the burden of deficit reduction on the shoulders of seniors, of low- income children and the disabled. And the president just feels that that's unacceptable."

A few moments later, Carney called the Republican plan "premium support or privatization or voucherization."

None of these can be considered terms of endearment, politically, particularly not by Republicans. They say their Medicare plan, developed by Rep. Paul Ryan, the House Budget Committee chairman, is designed to save the program from bankruptcy and preserve it for future generations.

At White House, Ryan and Obama clash
In the meeting the president hosted for rank-and-file Republicans, Ryan and Obama clashed.

The congressman told Obama it was not leadership to demagogue a good-faith attempt to save Medicare, when it is clear the program is headed for bankruptcy, according to several participants in the session.

Obama replied it wasn't leadership to shift billions in costs from the federal government to states and individuals who can't afford it.

Ryan responded that wasn't what his plan did, explained it in some detail and drew an ovation from fellow Republicans.

The Ryan plan retains Medicare in its present form for current beneficiaries and those age 55 and older.

Story: House GOP sinks debt-limit increase

For anyone younger, Medicare would consist of a government-mandated package of benefits, purchased on the open market from private insurers. Federal funds would help defray the costs for beneficiaries.

Polls and recent events such as the unexpected loss of a House seat in strongly Republican district in upstate New York and criticism from presidential contender Newt Gingrich make clear that the Republican plan is not favorable political terrain for the party.

They are on far safer turf, they concede, when they stress that job creation is their top goal and spending cuts the surest way to achieve it.

Even some House Democrats who once talked of wanting to allow more government borrowing without taking steps to rein in future spending voted against legislation last week to do precisely that.

Republicans presented the bill as something Obama had asked for, but the House Democrats' second-in-command, Rep, Steny Hoyer, called it a "demagogic vote" designed to render his rank and file vulnerable to campaign attack ads.

His comments underscore how much the Republicans have succeeded in casting the political debate since they were sworn into office in January and took control of the House.

If anything, the announcement from Moody's Investors Services that it might downgrade the U.S. debt, followed by a report showing an increase in unemployment, helped Republicans who are eager to put the Medicare debate aside.

"If we don't get our fiscal house in order, the markets will do it for us," Boehner said Friday.

Treasury Secretary Tim Geithner put it slightly differently after meeting with first-term House members, most of them Republicans who are determined to cut spending.

"I'm confident two things are going to happen this summer," he said. "One is we're going to avoid a default crisis, and we're going to reach agreement on our long-term fiscal plan."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Bernstein on debt fight: 'Fake, manufactured controversy'

  1. Closed captioning of: Bernstein on debt fight: 'Fake, manufactured controversy'

    >> welcome back to " morning joe ." 7:00 here on the east coast . a look at the beautiful picture of the united states capitol . that was white house press secretary jay carney saying yes, the ryan plan does amount to a voucher program. still with us on set, ed rendell and donny deutsch and pat buchanan and nora o'donnell in washington and the best-selling author and award-winning journalist, carl bernstein . great to see you.

    >> good to be here.

    >> what did you make about the meeting yesterday, the consensus at the table seems to be that house republicans visiting the white house came away with not much of anything as far as moving this process forward.

    >> we're headed for a train wreck . there's a fake manufactured controversy being stimulated in washington , particularly by the republicans on this issue of the debt limit. they're going to take it to the cliff. and pull back at the last minute. but the consequences of that are very dangerous. and at the same time, it really is time in this country to deal seriously with entitlements, but we're not going to do it before the election. we ought to be doing it before the election. get together, the president of the united states , the members of the congress and say -- once and for all, we are going to solve this problem, medicare is )jt up our budget. there is a way to manage health care in this country that is sensible. that involves making some changes of end of life decisions, am i right about that, ed?

    >> no question. i think carl 's point is so good. number one, the debt limit is not the place to have this serious discussion. it is not the place.

    >> a train wreck .

    >> it's a train wreck , he's absolutely right. secondly, he's absolutely right that we need that type of discussion. and as i said, tell the american people the truth. tell them there's going to be pain for everyone. but carl , i despair of the fact that that can be done before the election now.

    >> and it ought to be, it's the most pressing issue, we've been kicking this can down the road for 30 years, we solved it temporarily with social security . every year we increase the age of social security . same can be done with medicare . we've got to start trimming back. it's not about being awful to seniors.

    >> carl , let me ask you the trillion-dollar question. nora teed it up beautifully. we all understand the problem, we understand we're heading off a cliff. the question is, if a candidate electable if he comes out and says, as ed says look, shared sacrifice, here are the corporate tax loopholes, but you, individual voter, are going to have to kick in. can a candidate get elected? i think that's the trillion-dollar question.

    >> i think smart truthful candidates get elected. think you're sitting next to one of them. he was a governor, he did a hell of a job and he got elected because he's known as a guy who tells the truth. including tough truthings. you might not agree with him ideologically on some issues, but he got elected in pennsylvania.

    >> what virginia does, god couldn't run against warner of virginia the in ex-election.

    >> and he raised taxes. and that's the other thing, we've got to raise revenue in this country and it's going to happen. they're not going to call it a tax increase, but after this ? election, the republicans and democrats are going to get together. they're going to close the loopholes and --

    >> after the elections.

    >> that's the problem. that's the problem.

    >> because meanwhile, particularly with the stock market going through the gyrations it's going through this week, there is no room for error in this thing. we are in a precarious mess and we've got the most irresponsible group in washington , in both parties on this question. and this is one place where liberal democrats -- people say, i'm a liberal. liberals ought to get together and say, look, here's how we are going to deal with entitlements. we must address entitlements. make it a liberal issue. pat buchanan ought to get together with him and come up with a solution to this.

    >> pat, that raises the question -- are politicians in washington capable of having that adult conversation, of getting together and telling the country ha it needs to hear?

    >> this congress at this time, no. and republicans got a good argument. they say, look, why should we cooperate with a democratic congress and a president of the united states that have been every day accusing us of destroying medicare for all folks? now they've burned us good. let them step forward with their tax increase, and we'll see how that works. i do agree with this fundamental argument that the debt ceiling is the place, republicans , and i believe the train wreck is coming down the road. there's a possibility we could cause it sooner, but if we don't get budget cuts with this deal, this rising of the debt ceiling, if we don't get it now, i don't know that we're going to get it down the road. it's like saying, do it now, we'll take the short-term risk to avoid the certain long-term risk.

    >> how about raising revenue at the same time? how do you raise revenue at the same time?

    >> why don't you have joe biden come out and propose a democratic tax increase and we'll sue? how that goes. see if it goes a as well as the republican medicare proposal.

    >> call it closing the loopholes.

    >> if you said, democrats said, a, we're going to close the loopholes, 38 % of corporations pay no federal income tax and b, we're going to raise taxes on millionaires, do you think anybody in this country objects to that? any citizen? i think it's an easy sell, an easy sell.

    >> well have your friends go make that sell. but i'll tell you this -- listen, ed, i think right now, if you see what the economy is doing, it looks like we're headed downhill for a double dip. do you raise taxes on an economy that looks like it may be headed for 9% or 10% unemployment again? that goes against basic economic wisdom. i'm not sure tax increases as of right now are the right answer.

    >> buchanan has become a keynsian.

    >> and that when bush cut taxes, we had not a great record in terms of economic core spending increase. so the facts are what they are. it problem it has to be done, any smart people will tell you you have to have a rise in revenues and a cut in spending. it means everything is on the table. the thing about medicare that's sort of is a big concern i think for the republicans and i think while they're very bold in this proposal, while they're open to demagoguery and while they're open to a lot of political vulnerabilities is because as someone just tweeted me, how do you, if you make just $20,000 a year, how do you end up paying another $6,000 a year for medicare ? it can't be done. those are the real choices that real americans are facing. that's not my number. that is the kaiser foundation , which is a nonpartisan, under the ryan plan, that eventually seniors would pay $6,000 more a year in medicare costs. so for hsomeone who makes $20,000 a year, or even if you make $40,000 a year, $6,000 more for your health care is a lot. that's why they're politically vulnerable. i'm not passing judgment on the republicans plan. but that's what people are saying that's what it's going to cost me. i can't afford it, i can barely buy a can of beans for dinner.

    >> what is the democrats' proposal to pare back medicare ? what is their proposal to raise revenues? put them all out on the table the way the republicans did. they haven't stepped up at all.

    >> you are absolutely right.

    >> you got that right. the senate democrats have not proposed a budget plan. the president has begin a speech on the budget, but he's not proposed where detailed cuts could be. so they're vulnerable on the charges. that's certainly the argument the republicans are going to make. where is the democratic plan.

    >> people in the white house , you know, are now saying they think it's possible they can win the senate. as a result of this. you know, they were saying they could do 0% of that.

    >> the house. i don't know about the senate.

    >> you're validating my point that the thesedies of the situation do not line up with the politics of the situation. that's the reason the democrats -- i wish i shared your coombayah view, which is that individuals are not willing to give up anything for themselves. that's the political reality and that becomes the business reality.

    >> you're wrong.

    >> it's a vast generalization.

    >> you're absolutely wrong. first of all let me go back to the point that pat was making. president obama , give him credit, in the affordable health care act, he trimmed over what ? i?i $500 billion out of medicare advantage. and that's taking and reducing costs without reducing benefits. that was scary for some seniors and the republicans tried to take advantage of that as you recall. so he did, he did that. give him credit for that.

    >> wealthy seniors. we have to do more. we have to do more. we have to do the same thing that we did on social security . and democrats, carl is ? absolutely right. we out to be out there leading. we ought to be saying, we're the party that gave these entitlements and we're the ones who are going to save them.

    >> ahead.

    >> ed, obama care cost the democrats 63 seats in the house.

    >> but not because of that.

    >> now everybody is looking at that. everybody, and the republicans lost the 26. everybody looking at this and they say, look, i'll buy into that. and it's a death sentence for me. if we do. and that's why you got the press secretary of the president of the united states going back to the same argument that you know, it is a voucher system. they're still attacking ryan . so the republicans i think are rightly, we're going to go fast. they said we go first, you guys go next.

    >> carl --

    >> to donny's points, though, if it's the right thing to do and the american people are willing to hear it, why isn't there a politician saying it to the american people ?

    >> because the whole system, we come back to this every time. the system in washington is broken. one of the three branches of government is dysfunctional. it doesn't work any more. and as a result, our country is in terrible trouble. so the first time in our history, one of the three branches is fundamentally dysfunctional, doesn't work, doesn't do what it's supposed to do. under the constitution of the united states .

    >> i want to pick up on the willie's point. we are entitled, the government doesn't do it and politicians don't do it because they know individuals won't swallow it. you want those people making $50,000 a year to kick in $6,000, when i talk to my rich friends making millions a year, we should pay a couple more points in taxes --

    >> no, no, the other guy. it's a population that's mean, mean, mean, and that's it.

    >> ask the guy next to you how he got elected?

    >> how did he get elected.

    >> my first year and my first term, i raised the second highest amount of taxes in the history of the commonwealth of pennsylvania. four years later, i won by 21% for re-election, even ? though my opponent had $14 million and put it on tv saying he raised taxes. because we told people, yes we raised taxes, but here's what we got for it.

    >> governors, governors understand, governors are broke, their states are broke, they understand the need for revenue. in washington running for the congress, you only got a two-year term, you spend three-quarters of your term running for the damn thing, there's no time to worry about government.

    >> the one branch of government being broke. ha about the white house branch of government, where is their tax increase?

    >> you are absolutely right, pat.

    >> they've rolled out nothing.

    >> you are right. there's no courage on this issue and it ought to be a democratic party issue and it ought to be a republican party issue. let's deal with the problems of this country finally.

    >> we've had a meltdown and an economic meltdown. a political breakdown. it is time to start dealing with the problem.

    >> i wish it was true. paul ryan , forget whether you like him or not, it was courageous. i blame the american people , not the politicians.

    >> it's partly. absolutely. part of the populace, there's no question about that.

    >> the majority of people will understand.

    >> i hope you're right.

    >> nora , we can say all this, but the bottom line is, they're not going it take this up a year ahead of a presidential election .

    >> i do think there's going to be some sort of an agreement before the raising of the debt limit and there will be some nominal cuts here and there.

    >> farm programs.

    >> right. but what they're delaying ha is the giant moment that needs to happen. this giant coming together where they're talking about cutting 10% of the government workforce, where they're talking about closing military bases overseas, huge defense cut spending. medicare , medicaid spending cuts. tax revenues , a ? total reform of the entire tax system . a lowering of corporate tax rates to 26%, a comprehensive plan is going to be delayed, no doubt.

    >> the question is, is our political system capable of making a giant move like that a grand bargain? we're going to find out. big show ahead, deepak chopra will be here and tony-award-winning actor, bobby cannavele will be here and luke russert win join us from capitol hill . he sat down with congressman anthony weiner , and wes moore, a new dad joins the conversation. but


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