Washington, DC–(ENEWSPF)–August 1, 2011 – 11:54 A.M. EDT
MR. CARNEY: Good afternoon. Welcome to the White House. You may have noticed, if you look outside, that the cloud of uncertainty — (laughter) — has been lifted over our economy, or almost, anyway. We hope so.
I do not have any opening announcements, so I will go straight to your questions.
Q Thank you. Can you give us any update on how the President is spending his time today in terms of trying to rally support for this deal? Is he making calls to lawmakers? Does he have any meetings planned?
MR. CARNEY: I don’t have any scheduling updates for the President. As you know, the Vice President is headed to Capitol Hill and is meeting with the Senate and the House Democratic caucuses to talk about the deal with them and to answer their questions. So I think that’s part of the process that you talk about. I don’t have anything specific about the President.
Q So the President is doing nothing today to try to rally support for this?
MR. CARNEY: Well, no, I didn’t say that. I said I don’t have any scheduling updates for you or any phone calls or meetings or conversations to read out to you. He’s obviously been thoroughly engaged in this process all along, through the weekend — you saw him here last night in the briefing room — and will continue to be engaged. And you should not take from my answer that he is not speaking to lawmakers; simply that I don’t have any specific conversations to read out to you.
Q Can you tell us what message the Vice President is taking to the Hill today, particularly for liberal Democrats who are saying this morning that the President gave up too much in this agreement?
MR. CARNEY: He will carry the message that the deal negotiated with the leaders of Congress is a victory for the American people. Let’s start with point number one. The debate in this room and elsewhere in Washington in the past week was would we continue for the next few months, leading up to the Christmas season, have the uncertainty caused by a decision to relitigate the whole issue of raising the debt ceiling, would that uncertainty be continued, and would that be part of any agreement, the requirement that we would vote again to raise the debt ceiling within four, five, six, 10, 12 months?
The President was adamantly opposed to that, precisely because it would have such a negative impact on the economy. And that will not be part of this agreement. It is not part of this agreement. This agreement ensures that the debt ceiling will be extended through 2012, removing that cloud of uncertainty from the economy.
Second of all, the agreement ensures that there is an initial round of spending cuts that protect vital investments that will ensure that the economy can continue to grow, protect vital things like Pell Grants that are a high priority for the President, and, significantly, ensure that there is a firewall in the discretionary spending cuts between defense and non-defense spending, which, again, is a kind of protection we haven’t seen in a long time that is essential to making this a fair and balanced deal.
Then there is a committee set up — a special committee, as you know — by the legislation that will be bicameral and bipartisan with equal representation between Republicans and Democrats, and that committee will be charged with finding ways to ensure — finding ways to reduce the deficit even further, $1.5 trillion further. And everything is on the table for that committee; everything including both entitlement reform and tax reform.
And let’s be clear, the President thinks, as you know, that the biggest possible overall accomplishment in terms of deficit reduction is a desirable goal, as long as it’s balanced. And he looks forward to — through the process set up by that committee — to having that debate about what our priorities are.
If we need to, as legislated through this deal, find another $1.2 trillion to $1.5 trillion in deficit cuts, how are we going to do that? Are we going to do it by asking sacrifice only of middle-class Americans or seniors, parents of children who are disabled? Or are we going to ask that others, including oil and gas companies, corporate jet manufacturers or the wealthiest Americans share in the sacrifice? I think that is, again, a debate he’s looking forward to.
Q But why should Democrats be confident that you’ll be able to get those commitments in this special committee if you weren’t able to get them upfront in this deal?
MR. CARNEY: Well, we came very close, as you know, in a — to achieving a grand bargain with the Speaker of the House. And let’s be clear, belatedly it was conceded that in that agreement that was negotiated very painstakingly between the Speaker of the House and the President of the United States, revenue was on the table, and I quote the Speaker in that, including $800 billion as a minimum of revenue. So that was envisioned by the Speaker as part of a grand bargain had that been achieved.
Secondly, we saw close to 20 Republican senators endorse the ideas behind the Gang of Six proposal, which included not just revenue but $2 trillion in revenue, okay? So I think there is an enormous potential here for those who work on this committee and those who then consider it with their votes to see that the best possible way to achieve significant further deficit reduction, beyond the initial trillion dollars, is through a balanced approach.
And as you know, the legislation has within it an enforcement mechanism, a trigger. And the metaphor is apt because the trigger — well-designed triggers create a huge incentive for Congress not to pull them. And that is the case here, where those cuts that would be mandated if Congress failed to act — if the committee failed or Congress failed to pass the committee’s product would be across-the-board cuts split evenly between defense and domestic spending, including entitlements. Although I will note that Social Security, Medicaid and beneficiaries in Medicare would be excluded from any harm. And, again — but these are — the whole point of the trigger is that nobody wants to do them and that it’s equally onerous for both sides. And that, again, creates greater potential for the committee’s action to bear fruit.
Q And finally, just to look at the big picture, this debate was so contentious and it was so partisan — what can the American people realistically expect Washington to be able to do, particularly on jobs, between now and the election?
MR. CARNEY: That’s an excellent question. And there is no doubt that the process we have seen in the past several weeks and months was kind of a mess. And the President made clear a week ago today, when he spoke to the nation from the residence, that while Americans voted clearly last November, November 2010, for divided government, they certainly did not vote for or choose dysfunctional government. And in fact, they expect when they have divided government, when they have one party controlling some parts of the government, another party controlling others, that they will work together and together find the kind of compromise that is balanced, that is more — that is representative of where the American people want to go.
Now, this was a mess. There is no question. It was a circus at times. We unnecessarily sent the message around the country and the globe that the United States might in fact default on its obligations for the first time in its history. But in the end, compromise won out, and an agreement that we believe strongly is in the interest of the American people was achieved.
So looking forward, we hope to be able to build on that. None of this is easy, because all the issues are hard, but you do begin to build more capacity for compromise in the future the more you get under your belt. We certainly hope that to be the case, because there’s — we will not stop. This is — assuming, as we do and hope, that the Congress will pass it and the President then signs it, we then move on to the work of the committee and to all the other initiatives that we need to get going that will help create jobs and drive the economy. And we believe fundamentally that there is broad consensus in Washington that we need to focus on growth and job creation.
Q Jay, what’s the message to Democrats who see this as a capitulation, who see it as a bill that reflects more the Republican priorities than the Democratic priorities?
MR. CARNEY: Well, I just went through, I think, a number of arguments that we are making about why this is such a strong agreement, and why it is — no doubt it is a compromise. It is not a perfect agreement. It is not the one that the President or Democrats would have crafted if only they controlled all levers of government themselves, obviously. But it does accomplish some significant things, which I just went through with Julie.
Q Why should Democrats in particular support this bill?
MR. CARNEY: Because it protects key investments up front in the cuts that are launched initially — the trillion dollars, including, like I said, Pell Grants, which are so vital to our future economic growth and to the education of Americans. Because it creates a firewall between — in those domestic discretionary cuts, or rather those discretionary cuts.
It creates a firewall that ensures that savings are gleaned not just from non-defense discretionary programs, but from defense. And then it creates a process through the joint committee which will allow for the President and Democrats and others, including a lot of Republicans who have an express — have this view and have expressed it recently, that we need to take a balanced approach going further as we seek more deficit reduction. And that balanced approach would include revenues.
Q And you mentioned job-creating measures; what’s the strategy, at this point, on getting the payroll tax extension, which wasn’t included in this measure? Is the President still committed to doing that, and how do you do it?
MR. CARNEY: The President is committed to doing that, and I think it’s important to remember that the President publically and vocally talked about endorsing the idea of including an extension of the payroll tax cut as part of a grand bargain or a big deal. That is not the case in this deal that is short of a grand bargain, but it is — there is no question that he will continue to push for this. And he will make the argument that it is absolutely essential to continue to put extra money in Americans’ pockets as they deal with high energy prices and high food prices next year, because it was so important this year. We certainly look forward to having that debate in the fall, and he will press very strongly for it.
I note that there was broad bipartisan consensus beyond the creation of this tax cut at the end of 2010, and so we certainly expect there would be broad bipartisan consensus to extend it for next year.
Q House Republicans seem to be arguing that this super committee is going to have a difficult time doing any tax reform because it’s going to be supported by the CBO, and the Bush tax cuts are set to expire in January of 2013. Could you comment on that?
MR. CARNEY: Well, I’ve seen that and I would simply say that the suggestion that it is impossible for the joint committee to raise tax revenue is simply not accurate; it’s false. If the joint committee decides, for example, that part of a balanced deal should be to eliminate tax subsidies for oil and gas companies or corporate jets, or if they decide to limit the value of itemized deductions for high-income earners as the President has called for, they can do that and they would raise revenue through doing that.
Second, nothing in the legislation that’s being considered by Congress specifies at all that the committee operate under any specific baseline. Any suggestion otherwise is simply false.
Q But doesn’t it apply to the Budget Act? Isn’t the Budget Act supported by the CBO?
MR. CARNEY: But the committee can act accordingly — according to whatever baseline it chooses. It could act — for example, it could decide to use — operate under the baseline used by the fiscal commission that assumed the expiration of the Bush high-income tax cuts. Or it could operate under a current policy baseline, which is what Speaker Boehner was relying on when he said he had agreed to $800 billion in revenue. So it’s simply not accurate that this committee can’t consider and act on revenue raisers.
Q And that includes lowering rates, not just the provisions you talked about but —
MR. CARNEY: Well, again, I mentioned the Bush tax cuts as part of that. And let’s also be clear that, one, the President has made — whatever the result, if Congress does not act on tax reform, which, by the way, broadly speaking, is supported by both parties, a desire for tax reform — so there is great incentive created in this committee to deal with tax reform because of the — remember, it will be a balanced committee between Republicans and Democrats, and they need to produce a product that will then be — have fast-track authority and be voted on by Congress. It is certainly our expectation that that product will include revenue as well as other areas of finding deficit reduction.
If it fails either to produce something or if Congress fails to act on it, you can be sure that the President will honor his promise to veto any legislation that would extend the Bush high-income tax cuts beyond 2012, which would, of course, create nearly $1 trillion in revenue raisers when that happens.
Q In Afghanistan, the most recent month for which statistics are available — I think May and June — indicate that ISAF casualties are down 40 percent and civilian — Afghan civilian casualties are up 50 percent. Why is that?
MR. CARNEY: I would refer you to the Department of Defense. I haven’t — I confess I haven’t studied those numbers of late. But obviously the situation is — continues to be a tough one and fighting continues to occur. But we believe we’ve made significant progress in implementing the policy proposal the President put forward, and we are now in the process of implementing the drawdown as he made clear in his address not long ago, and drawing down the surge forces beginning now.
Q Does is concern the administration, the President, that —
MR. CARNEY: Well, again, I haven’t looked at those numbers so I don’t have a specific response related to those numbers. But obviously we believe very strongly that we are in a position where we can begin to draw down those forces, and we are continuing to do so.
Q Jay, how hopeful are you — or how hopeful is the President, I should say, that this plan will help avoid a downgrade in the credit rating?
MR. CARNEY: Well, we take action and control the things that we can control. And what is important about this is that we have not simply averted what would have been an absolute disaster, assuming, again, Congress acts, which would have been passing a period beyond which we would no longer have had borrowing authority and risking — creating the possibility of default on our obligations for the first time in our history.
But we have lifted that cloud of uncertainty for a sustained period of time. And we think that coupled with the real and significant deficit reduction that is part of this package and the enforcement mechanisms that guarantee further deficit reduction is taken before the end of the year, we believe that that should send a very reassuring message around the world, as well as around the country, obviously, that Washington is beginning to get its fiscal house in order.
Q So is it fair to say that your concern in that area is much diminished?
MR. CARNEY: Well, our primary concern was that we reach an agreement, a compromise, a bipartisan deal that would ensure that we lift the cloud of uncertainty created by this debt crisis. We have done that, and that we would through that process ensure that we would have significant balanced deficit reduction. We’ve done that as well.
We certainly hope that that sends the signal that Washington is getting its act together and dealing with these tough issues.
Q Do you think it’s enough?
MR. CARNEY: Enough for?
Q To avert that?
MR. CARNEY: Well, again, I’m not — I just — I don’t really have a comment on how the rating agencies make their judgments. All I know is that we in Washington, the policymakers and the elected officials, can do the things that we can do to ensure that the American economy is going in the right direction and that we are demonstrating that we’re getting our fiscal house in order, and then hope that that message is made clear.
Q What kind of assurances did Democratic and Republican leaders give the President that they can get the votes to pass this?
MR. CARNEY: Well, I think it was part of the agreement was the expectation that they could get the votes to pass this, and hopefully they will.
Q And do you have a signing ceremony?
MR. CARNEY: I don’t have any announcement or scheduling announcements to make on that.
Q You mentioned that the President and the Vice President are selling this to members of Congress by saying it’s a victory for the American people. How is this a victory for the American people when it still adds $7 trillion to the deficit over the next 10 years?
MR. CARNEY: Because it significantly reduces the deficit. It significantly addresses some of the drivers, or will address some of the drivers of our long-term debt. And if you’re asking does the government continue to function and does — do we still owe — do we still have to borrow money to pay our bills — yes, that has not been eliminated; we will continue to have a debt. The point is, economically, is to begin to get the growth in our deficits and the growth in our debt under control. And that is what this agreement begins to do very significantly. Will all the work be done? Absolutely not. That’s why the joint committee’s work is so important.
And I’m sure even as that occurs and takes place, there will be more work that is necessary. But this is significant, and it would not be discounted. I mean, it’s a little — the ink hasn’t even been printed on the paper yet, let alone signed into law, and we’re already talking about how it’s not substantial enough or what the next step is. I think we ought to all take a step back and remember where we were 24, 48 hours ago, a week ago, two weeks ago — the prospect that was hanging out there that America would not honor its obligations for the first time in its history, and the impact that would have on our economy and the global economy.
And the fact that while I got a number of questions, understandably, during briefings in recent days and weeks about why we were optimistic that we could reach a bipartisan compromise, because it looked so unlikely, the fact is here we stand today — less than 24 hours after that compromise was reached — anticipating votes in both houses of Congress that will achieve something rather significant. Yes, that’s a victory for the American people.
Q You talk about two weeks ago — two weeks ago, the President talked a lot about shared sacrifice. He talked about ending subsidies for oil companies. He talked about ending tax breaks for corporate jet owners. He talked about that this was a very fair deal where he was offering three to one spending cuts, one in tax revenues. Where are the tax revenues?
MR. CARNEY: Well, Norah, I think we just addressed this, but I’ll be happy to do it again. We did not get the grand bargain up front. And we all know why, okay? There were, as the Speaker himself said, $800 billion on the table in revenues, part of a grand bargain. There were tough choices made by both sides in that potential agreement that was not reached, and we did not get that done. The Speaker decided he could —
Q But you have Democrats saying you gave them everything they wanted and we got nothing.
MR. CARNEY: Norah, I feel like I’ve taken this question two or three times already. And I’ve been very clear about how that’s not the case, and in fact, we had — we got significant achievements — let’s step back also. The President of the United States believes that deficit reduction is important. It is a false setup to suggest that somehow a dollar in deficit reduction is a loss. It is a positive thing for Democrats —
Q Yes, but you believe deficit reduction has to be done with spending and revenues.
MR. CARNEY: Well, he does. And that’s why he fully expects that the joint committee will include tax revenue as part of its consideration and its product. But as you know, throughout this process, there were cuts identified through the Vice President-led process in domestic spending and also in the presidential-led process with the Speaker of the House. And you see that embodied in the first tranche of spending cuts that are part of this deal. I mean, that is not a negative, that is a positive.
As the President made clear, progressives need to understand — and we think most obviously do — that deficit reduction is essential, done in the right way, because we need to get our fiscal house in order, in order to ensure that we can do the things we need to do to grow the economy and make the key investments we need to make.
Q Finally, can you address the word that The New York Times used today in a front-page piece, that the President has been diminished?
MR. CARNEY: Well, I disagree. I think the President showed enormous leadership through this process. Again, he directed the Vice President to lead the talks with the House Majority Leader that produced the — basically the foundation of the initial round of tax cuts that were — I mean, of spending cuts that were part of any envisioned compromise. He then initiated and had sustained negotiations with the Speaker of the House, which while they did not bear fruit in the terms of an agreed-upon grand compromise, they made clear through that process that for significant deficit reduction to be achieved, beyond the initial round of spending cuts that are part of this agreement, there has to be balance. That was agreed upon. It was on the table, rather — put on the table by the Speaker of the House, and acknowledged — it was certainly acknowledged by the nearly 20 Republican senators who endorsed the ideas behind the Gang of Six.
I think a threshold has been crossed here. And the beauty of that is, is that the elected leaders here are catching up to the American public, who overwhelmingly support the President’s position that balance is really essential as we approach these hard choices. So we think the President’s leadership has been essential to that process and will furthermore ensure that the kind of deficit reduction we get in the future will be the right kind for the American people.
Q But Jay, where are the tax revenues? No, I’m just kidding. (Laughter.) On taxes —
MR. CARNEY: That was awesome. Thank you.
Q On taxes, one of the ways you’re selling this overall plan is that, as you started the briefing, the cloud of uncertainty has been lifted. And businesses were saying are we going to default. The American people were saying, are my interest rates going to go up. Businesses are also telling the President all the time — he says this in his public speeches — they want certainty on taxes; they want certainty on all these things — and so do the American people. They want to know what their taxes are doing to be.
So while on one hand you have certainty about no default, isn’t there now a lot of uncertainty about taxes? Because as you’ve been, pardon me, spending the last 10, 15 minutes, nobody really knows where the tax rates are going to be. You’re saying —
MR. CARNEY: Well, no —
Q — taxes are on the table in round two. Republicans are saying, no, they’re really not.
MR. CARNEY: Well, I think I addressed that issue, the baseline issue, which we are quite clear about is simply not part of the deal, and it’s irrelevant because the committee can take whatever action it chooses.
The President has made clear that when we talk about the need for balance and raising revenue as part of a broader approach to deficit reduction, we are talking about protecting average Americans — not just protecting them from tax hikes, but, as was noted earlier, extending tax cuts for them.
This President has since he has taken office cut taxes significantly for working Americans. The only — at the marginal rate level, at the income tax level, the only rates that the President has sought to return to the levels of the Clinton administration, which, by the way, was a period of the longest sustained expansion — economic expansion in postwar American history, where 23 million jobs were created, and where rich people did very well, indeed, which is a good thing, those rates prevailed.
He thinks we should return to those rates as part of a process where everyone shares in the sacrifice necessary to get our deficits and debt under control.
Now, we may not get there because tax reform is a goal of his as well. And it is a goal shared by a lot of Republicans. And if the committee can produce tax reform that raises revenues and contributes to deficit reduction but simplifies the tax code, that would also be a good thing. But it will not result in — and we certainly — we certainly do not want it to result in putting added burdens on average Americans. This President’s approach has been just the opposite.
Q Quick follow — quick follow on Medicare. Making a big deal about saying Medicare beneficiaries will not be touched in round two, that if there are these drastic cuts, they would affect Medicare providers. Doctors are already saying they’re dropping Medicare patients. They’re not getting enough reimbursement. And so if you hit providers, it’s going to wind up affecting senior citizens, isn’t it?
MR. CARNEY: Well, let me just be clear —
Q Someone gets knocked off Medicare —
MR. CARNEY: You’re talking now — let’s just, for everyone watching, that we are talking about the trigger, the enforcement mechanism for the second stage here, which is onerous for a reason. It is onerous — while it does, and it is very important to remember that low-income programs, including Medicaid, as well as Social Security and Medicare benefits would be exempted. Medicare cuts would be capped, limited to the provider side. And yet this is still tough stuff, and it’s supposed to be tough stuff — just like the envisioned 50 percent cuts in our defense budget so that Congress doesn’t go there.
So the whole purpose of a trigger is that nobody wants to pull it. So that focuses the mind of members of Congress on the need for the joint committee to produce a product that can pass in fast-track manner, pass both houses of Congress and be signed into law. And that would be a very welcome result of this.
So if you’re asking me is the — are the enforcement mechanisms here tough? Yes, the answer is they are.
Q Right, but you’re trying to sell it as Medicare beneficiaries won’t be hurt. It will just be the providers. But, in fact, if providers get hit, it affects senior citizens. Beneficiaries —
MR. CARNEY: Well, the program — the program’s integrity is sustained. Beneficiaries do not see their benefits cut. The cuts are capped and limited to the provider side. That is written into the agreement.
Q In The New York Times today Paul Krugman wrote, “This deal will damage an already depressed economy. It will probably make America’s long-run deficit problem worse, not better.”
How does the White House respond to that type of criticism?
MR. CARNEY: Well, we obviously disagree. We think that done well, done wisely and in a way that protects key investments, that deficit reduction will help the economy. We think that will be the case here. And it is also why, as I mentioned earlier, why the President will continue to push for the extension of the payroll tax cuts that put a thousand dollars — or is putting a thousand dollars in the average American family’s pocket this year. He hopes to extend that next year. He believes there will be bipartisan support for doing that.
So you need to take — that’s why balance is so important and timing, as the cuts are enacted, is so important and where those cuts come from is so important. We believe that overall, done well, that the positive impact of the fact that Washington is getting its act together and getting its fiscal house in order will outweigh the effect — the negative effect of cuts because of the way the cuts are structured and enacted, and because of the protections that are embedded in this legislation.
Q In addition to balance, the President also talked a lot about not wanting to kick the can down the road. Doesn’t this deal in essence kick the can down the road? I mean, it’s not really dealing with any of the hot-button issues now.
MR. CARNEY: Well, I appreciate that — I mean, the question goes to the President’s very strong desire that he articulated many times to get a grand bargain upfront, which would have required that he and the Speaker reach an agreement. That didn’t happen. We don’t have to relive that disappointing past. But the process did produce a lot of positive product that can be used by the special committee, for example, the joint committee going forward if they’re looking at a balanced approach to further deficit reduction dealing with entitlement reform and tax reform.
There is no question that the President preferred a grand bargain up front that would have dealt with all of these issues all at once. Once that was not going to happen, what we needed to do was ensure, A, that the debt ceiling was lifted for an extended period of time so the cloud of uncertainty would be removed from our economy; and B, that we got — we nevertheless got significant deficit reduction that was balanced. And we believe that this compromise, while not perfect, achieves that, and that while on the issue of tax reform and entitlement reform the can is kicked a little bit down the road, the fact is that the legislation forces action on this very soon, the committee must report out by Thanksgiving, Congress must give an up or down vote by Christmas. In terms of the way that Congress normally rolls, that’s pretty darned fast.
Q But given that we were facing what you have said would have been an economic crisis if the debt ceiling was not raised tomorrow, why should people have so much faith that these triggers will actually motivate this bipartisan committee to act when really the triggers are cutting —
MR. CARNEY: Well, let’s be clear about the triggers. First of all, they’re onerous for both sides, and I think that the proof of that has been seen by the reaction in some quarters. But they are designed precisely to incentivize Congress to act. What the triggers also do, if Congress — either the committee fails or Congress rejects the committee’s product, is that it will ensure that significant deficit reduction is enacted anyway. So when you — either way, you will have significant deficit reduction.
We hope and we also believe that most members of Congress in both parties hope that that will be accomplished through the joint committee, because the alternative is so onerous.
Q Just to follow on that. But the way that the trigger is structured, it doesn’t actually kick in until January of 2013. So what incentive does Congress have and the committee have to act in November or December if the real pain doesn’t come until January of 2013? And how is this not set up so that the Republicans, the President, Democrats aren’t having this same fight all through the election?
MR. CARNEY: Well, I’m sure they’ll have the same fight, because there’s obviously an honest set of differences about how government should behave, its role, its effectiveness. And that will be a debate that will, I’m sure, take place throughout next year. The debate we won’t be having is whether or not the debt ceiling should be raised. We will not have a situation where people will hold the American economy hostage in order to achieve a specific agenda — at least not until 2013. So we think that is incredibly important as a matter of economic good. And that is a significant achievement that this — created by this agreement.
In terms of the trigger, the provisions called for by the trigger are onerous. I think everybody agrees to that. It’s a matter of law, and we do believe that Congress will want to avoid it.
Q But how — but you’re saying — but your argument in that it’s not kicking the can down the road is saying that Congress and the President are going to deal with this in the fall, but they really don’t have to deal with this until January of 2013.
MR. CARNEY: But that’s like saying that any law you pass tomorrow, because its implementation is over a certain period of time, is meaningless. That’s not the case. And the fact is it will enact into law significant reductions, whether through the joint committee or through the trigger provisions. And we believe that the committee will want to avoid the trigger being pulled, and therefore hopefully will take action in a balanced way.
Q Jay, as you know, the CBO had issues with the savings numbers in a couple of the previous proposals. How confident are you that this is going to pass muster?
MR. CARNEY: Well, I mean, I believe it will pass muster. I haven’t seen CBO yet on this.
Q And just a quick logistical question: How do you all plan to respond to — as these two votes are taken, will we see the President again with —
MR. CARNEY: We’re still — even though the cloud has mostly lifted, we’re still in that period where things are pretty fluid, so I don’t — I cannot anticipate whether or not the President will stand before you any time soon.
Q The Senate chaplain saw a rainbow, by the way. (Laughter.)
MR. CARNEY: Yes, sir.
Q Back to the rating — just a moment — a clean-up question: Is anybody in the administration talking to the rating agencies to make arguments to them —
MR. CARNEY: I don’t know.
Q — either here or at Treasury?
MR. CARNEY: I just don’t know. I mean, I think there are — I would direct you to Treasury, that normally handles that stuff. And I think that pretty much taps me out on my knowledge on that question.
Q Let me shift to another economic question. There was a manufacturing index that’s out — comes out this morning, a widely watched one. It showed U.S. manufacturing in July expanded at the slowest rate in two years, many business citing cutbacks, just lack of demand. Mr. Sperling, on talk shows yesterday, said that he saw or the administration sees a growth of possibly 3 percent in the second half of this year.
MR. CARNEY: Well, I think —
Q How is that possible?
MR. CARNEY: What I think Gene said is that there is a — I think that there is a general consensus out there about what growth might look like in the third and fourth quarters. The ISM that you’re talking about is not for the third or fourth quarter; it’s for the second quarter or July of the second quarter. So what we have acknowledged all along is that growth is not fast enough, that job creation is not substantial enough of late. And one of the — I mean, there are a number of reasons for that, some of the headwinds that were caused that were obviously out of Washington’s control — the earthquake and tsunami that did so much damage in Japan and disrupted supply lines, and therefore had a direct impact on the American economy as well as the global economy, and the higher fuel prices that were caused by — in large part by the Arab Spring and the unrest there. So we — and then the ongoing issues in Europe.
So we continue to manage the effect of those headwinds. We believe that it is very important that we have hopefully averted what would have been the most substantial headwind of all, which is a default for the first time in our history, and that that will contribute to a more positive environment that we hope will allow for greater growth and job creation.
Q You don’t have a lot of tools left, though, in your quiver.
MR. CARNEY: We got a quiver. (Laughter.)
Q What sort of lawmakers would the White House like to see or what characteristics on the joint committee?
MR. CARNEY: Oh, I don’t — I know there’s an urge to leap forward. I don’t know yet. I think what we would like to see is people who are serious about the task, who are serious about the need to take an approach that can create a consensus and that is balanced, and who believe that significant deficit reduction is in the country’s interests if it’s done well and in a balanced way.
Q You’ve used words like “It was very messy,” “a circus.” I think the President himself said that the crisis was imposed by Washington on the rest of America. I mean, there’s a sense that it was self-imposed, a self-created crisis. In retrospect, then, what could the President and the White House have done differently over the past month that would have averted such a self-imposed crisis, sort of in terms of performance, in terms of managing this?
MR. CARNEY: Well, I’m sure we’ll all have time to look back at this and we’ll read your tick-tocks with great interest when you write them, about how it all unfolded. I mean, we feel that the President made very clear what his priorities were. He tried to force the process forward at every juncture through — beginning with his framework through to the creation right after that of the negotiating body led by the Vice President; his sideline — offline negotiations with the Speaker of the House, his constant exhortations to Congress to be willing to compromise, because the American people so demanded compromise.
It is simply a fact that we have a divided government and we have some divergent views here, and that resolving — reaching compromise is not always easy, but we believe that it is important to note that we achieved that, and
that that is a building block going forward. We hope so.
Q But if it’s a circus, and it was messy, does the White House share a responsibility and feel like —
MR. CARNEY: Well, I just think — I think I answered the question. I think I laid out the steps that this President took. He’s obviously not an elected member of Congress and cannot control the approach taken by the 535 members of that body.
Q Jay, when people talk about the trigger and the automatic spending cuts, it seems to be portrayed as the Democrats won’t want to risk deep cuts to entitlements; Republicans won’t want to risk deep cuts to the Pentagon budget, but don’t deep cuts to the Pentagon budget also threaten the administration?
MR. CARNEY: We are not in support of cuts of that size. The President laid out in his framework his belief that working with then Secretary Gates and now Secretary Panetta that we can identify a further $400 billion over 12 years in reductions in defense spending. And we achieved pretty much that, something on the order of that in this first round of firewalled discretionary spending cuts.
So you’re right — I mean, this is not — let’s make clear that the President, as Commander-in-Chief and the way he views defense spending, does not support — would not support these kinds of cuts envisioned in the triggering mechanism either, but this is the point. I mean, none of these outcomes are positive, and that is why they are to be avoided and why we believe Congress will avoid them and act through the joint committee.
Q But were you to have these automatic cuts in military spending, would it impede the nation’s ability to wind down Iraq, to slowly wind down Afghanistan, to maintain its involvement in Libya? Would all of these various national undertakings be called into question if you suddenly face the prospect of deep —
MR. CARNEY: Well, there are a lot of ifs, and I think as a point made earlier by Carol, the fact is, is that those cuts would not begin until 2013, if that trigger went off, was pulled. And I think that, as you know, we are withdrawing all of our forces from Iraq, and we are already engaged in the drawdown of our surge forces in Afghanistan.
So having said that, I’ll go back to my first point, which is that the President does not — has not called for and would not support these kinds of cuts in defense spending. He believes that that opinion will be shared broadly by members of Congress, and that for that reason we will not get there. This trigger will not be pulled, and therefore, we will achieve significant deficit reduction in a more balanced way.
Q Jay, I’m still not clear on the fate of the grand bargain. Is it something that the committee could still conceivably take a crack at?
MR. CARNEY: Sure.
Q Is it possible that there might be additional offline discussions, as you’ve described the President’s dealing with Speaker Boehner? Or is it definitely off until after the election?
MR. CARNEY: Well, anything is possible in terms of offline discussions, and I’m sure you’ll read about them at some point when somebody leaks them. But the — (laughter) — obviously a portion of the grand bargain will have been acted on already — the upfront, the initial spending cuts. What I was talking about — what has been provided by the work, the positive work that the Speaker of the House and the President did, is a lot of detail about how you could get to significant tax reform and entitlement reform, and the savings that you can glean from that, the deficit reduction you can glean from that.
And while the committee will — may have its own ideas between what the President and the Speaker of the House were working on, the Gang of Six proposal, Domenici-Rivlin, Simpson-Bowles — a lot of their work will have been started for them, and they can frame a package that we believe will hopefully achieve significant deficit reduction in a balanced way — further deficit reduction looking at the hard issues of entitlement reform and tax reform.
Q Do you expect that they’re ever going to produce a $4 trillion package?
MR. CARNEY: Well, the $4 trillion — the $3 to $4 trillion, depending on where we ended up, included within it the spending cuts that will have — that are part of this deal that was reached yesterday, so the answer is not in that form. But I think that if — we are going to get upwards of $3 trillion in deficit reduction through the agreement reached yesterday, and assuming, as we do, or hoping, as we do, that the second tranche of that will come through the action of the joint committee and the vote by Congress on the product of the joint committee, that it will include the kind of balance that was being worked on by the Speaker and the President.
Q April is right here.
MR. CARNEY: I’m sorry, April. I saw you and then I looked over there. (Laughter.) Then I’m going to call on Ann, the other A. Yes, April, you go. I called your name; you’re next.
Q Oh, thank you. Jay —
MR. CARNEY: It’s like a trick, pass —
Q Yes, you know a lot about tricks. (Laughter.) Leading up to the agreement, the President kept talking about compromise. He kept talking about compromise. Was this a true compromise? Or do Republicans get more of the compromise than the President?
MR. CARNEY: We believe it’s a true compromise, and I announced — I mean, I enunciated rather early on in this session many of the reasons why, and the accomplishments that we believe make it a deal that Democrats should support or we hope they do support. So nobody here — and I think you’re hearing it from the other side as well, believes they got everything they want, because they didn’t get everything they want. It is not an agreement that could have been crafted by the President or Democrats alone, and it’s not an agreement that could have been or would have been crafted by, as we’ve seen through the measures that they have tried to enact, by the House Republicans alone, or Senate Republicans.
So it is a balanced compromise, reflective of a divided government, in a situation where action had to be taken by Congress, and therefore some sort of consensus had to emerge — bipartisan consensus or compromise had to emerge from Congress.
Q Now, also, on the ratings agencies, did this — some office within this campus send the ratings agencies, during the process, information as to what they were looking at? Because throughout the process they kept saying, oh, you know, you’re going to lose your credit — or your AAA credit rating and things of that nature; you’re going to default. Was this administration actively sending credit agencies, the rating agencies, information about possibilities for an agreement?
MR. CARNEY: Well, I don’t know about possible — I don’t know a great deal about the communications that administrations have with the rating agencies, but I know that they have communications — I believe they have communications as a regular matter, as the ratings agencies seek information about what’s happening and that sort of thing. But I would refer you to Treasury for more details.
Q And I’m going to ask you one final question with that. Do you believe that S&P, Standard and Poor’s, overstepped their boundaries? Because America was — Americans, taxpayers, were very concerned about the credit rating. People were — some critics were saying that people were made anxious; there was anxiety about this.
MR. CARNEY: There was — I don’t really have any response, because I — it’s simply not for me to evaluate an independent rating agency’s processes. But I will say that there was reason to be anxious — absolute reason to be anxious. While we remained justifiably confident that in the end Congress would do the right thing, that the leaders would all be true to their word and take action to ensure that we would avoid default, that prospect was there, clearly. And it had an impact on the markets and on people’s psychology about where — what was happening in Washington. And that’s why we think it is such a significant achievement to get, we hope, get beyond that process and to ensure that we don’t have this kind of negative — I mean, this kind of debate that is so bad for our economy in the next several months or six months or 10 months, but that we would push off this issue through 2012.
Q But did that anxiety stem from the S&P saying —
MR. CARNEY: I don’t believe that’s the case.
Q — that our AAA credit rating was in jeopardy.
MR. CARNEY: I don’t believe that’s the case. I think prior to that and prior to discussions of that, there was ample reason, as we approached the August 2nd deadline, for people to be concerned about whether or not Congress would in fact do the responsible thing. And we’re obviously happy that an agreement was reached.
Q Thanks, Jay. I have two quick questions. First of all, throughout this process, you and everybody sane pretty much has agreed that the threat of a default was a catastrophic one. So I’m wondering why the response from the outset wasn’t, well, we can talk about what you want after you put the pin the back in the grenade. And what are the chances that that’s how the President will respond when this comes up in his second term?
MR. CARNEY: I like the phrasing. (Laughter.) And I like the notion — the confidence that we’ll be discussing this in early 2013. I honestly haven’t lifted my sights to the horizon there to anticipate what that discussion or what that debate will look like. Clearly, as all of you have noted in your pieces, this debate will continue about the broader issues between Democrats and Republicans and the President and his opponent, when there is one. There’s no question that debate will continue, and the President looks forward to that debate as we move towards next year’s election.
What was important is that this action be taken and that Congress acts today and tomorrow to ensure that we do the right thing by our economy and by the American people. The political debate around this will obviously rage on next year and beyond, and that’s the nature of our politics.
Q But, I mean, why even let that political issue get tied to a doomsday thing like the debt ceiling? Why not just say we’re not going to talk about that?
MR. CARNEY: Well, we obviously — I don’t — the reality is that statutorily Congress had to — has to act to raise the debt ceiling. You’re correct that in the past, while it has sometimes been an unpleasant vote for members of Congress, it was not used in this way — and we found that unfortunate. But that was the reality that we face. And through this process we were able to accomplish some important goals, including extending the debt ceiling through 2012, but also achieving the kind of upfront deficit reduction we believe is significant in a way that’s balanced between defense and non-defense discretionary spending and create a mechanism that allows hopefully for the enactment of further balanced deficit reduction through entitlement reform and tax reform.
Q Second question, you talk about the triggers being onerous to both sides. But I mean there’s really a third side involved here, the Tea Party. If the threat of default didn’t make them blink, what makes you think given the opportunity to defeat revenue increases that they won’t say, sure, you know what, cut away, it’s right in our briar patch?
MR. CARNEY: Well, I think that the trigger mechanism is devised in a way that there is unpleasantness for everyone in pretty much every political persuasion up on Capitol Hill, and that if we get to that — we hope we don’t — there will be — or when we get to the stage of making choices about voting for what the joint committee produces that there is an assessment made by the leadership in both parties and others that — again, this is a lot of ifs here, but that what will have been produced by the joint committee to achieve this significant further deficit reduction is a far better approach than what would happen if the trigger was pulled. We simply believe that.
That’s why it’s so important to have a kind of mechanism like that. And it’s very similar, by the way, to the mechanism that was in place through Gramm-Rudman-Hollings that led to the 1990 budget agreement, which was the first of three budget agreements which laid the groundwork, created the foundation for, as I mentioned before, the longest peacetime expansion in American history, and the creation of 23 million jobs in the 1990s. So the threat of these triggers being pulled can force Congress to do significant things that can be very, very good for the economy.
Cheryl, I’m going to do the last one for you. And then I owe Ann. Okay, Ann, then Cheryl, and then I’m done.
Q Two months from today, new fiscal year. Does this process mean that the President just expects a continuing resolution by September 30th? Or does Congress continue to work on appropriations?
MR. CARNEY: Oh, Ann, please don’t make me dive into that debate today. I don’t even know. I mean, we’re keeping hope alive here for positive negotiations and agreements with Congress.
Q And amazingly, my question was similar in that did you get any —
MR. CARNEY: You guys.
Q Did you get any agreements from Republicans that they aren’t going to extract spending cuts for continuing resolutions? Because they are going to have to redo all their appropriations bill now —
MR. CARNEY: I think the agreements that were made between Democrats and Republicans and the White House are all written down for you to see. I don’t — none other than I’m aware of.
END 12:46 P.M. EDT