For those of you who came in during the third act, a guide to reading between the lines as Obama political adviser David Plouffe makes the rounds of the Sunday shows: First, despite what he says during this appearance on Meet the Press, there is
July 31, 2011

For those of you who came in during the third act, a guide to reading between the lines as Obama political adviser David Plouffe makes the rounds of the Sunday shows: First, despite what he says during this appearance on Meet the Press, there is no such thing as "a balanced deficit reduction package that doesn't harm the economy" during a prolonged recession. Nope, not gonna happen. (Just ask Paul Krugman, Joe Stiglitz, Dean Baker or Jared Bernstein.) Second, there's nothing "balanced" about a scenario where the public deals with the brunt of extensive cuts with no additional revenue and three, Social Security and Medicare are in the gun sights. Notice how he works that in there: "Our view is things like Social Security and Medicaid, you know, they can't be part of the solution here unless you've got a balanced package that includes tax reform." Whee!

David, please tell your boss: We don't see Social Security, Medicare and Medicaid as "part of the solution" to a manufactured debt crisis. They already are a solution, one that's worked very well for us, and we want no part of your plan:

MR. GREGORY: I'm joined now by senior adviser to the president David Plouffe. Welcome back to MEET THE PRESS.

MR. DAVID PLOUFFE: Good morning, David.

MR. GREGORY: So from your vantage point, you're inside the room. Is that overly rosy, or are you that close?

MR. PLOUFFE: Well, we don't have a deal. Everyone is cognizant, as, as Chuck Todd just reported on, both the legislative clock and, more importantly, the default clock. So the hours are ticking here. I think what's clear is that there's general agreement that we're going to have deficit reduction in two stages. The first is going to be something the parties largely agree on, about $1 trillion in deficit reduction. The second stage is going to be the trickier, elements of entitlement reform and tax reform, which this supercommittee's going to be charged with. And I think it's going to be incumbent on the leaders in Congress to appoint people to those committees who are going to drive to yes, to try and compromise, get out of their party's comfort zone.

MR. GREGORY: Let...

MR. PLOUFFE: Yeah.

MR. GREGORY: Let me be clear, though. What will the president accept as a deal?

MR. PLOUFFE: Well, first of all, we--it's clear our economy is obviously not as strong as any of us would like it to be. This debt ceiling cloud has harmed our economy. Why on earth would we want to go through this again a few short months from now?

MR. GREGORY: So it has to be through 2012.

MR. PLOUFFE: So--for the economy, number one. Number two, we want to make sure that if there is an enforcement mechanism--and again, the committee is not going to be charged with just doing spending cuts only. The committee's going to be charged with looking at our entire deficit reduction problem and look at things like tax reform and revenue. You need--you want something to compel this committee to act. That was part of the president's approach that he laid out to the country a few months ago, that there would be a debt cap that would enforce action. So you want to have something that compels both parties to act. Because I do think there's going to be a lot of pressure, rightly, on this committee to produce something that Congress can vote on. Yes.

MR. GREGORY: But, but a lot of people watching this have got to be wondering, what's actually going on today? What is the fighting about? So first stage, you, you cut government spending over a 10-year period to raise the debt ceiling. Part of that is a second stage, another committee in Washington that looks at really making the hard decisions. And then if they don't make the hard decision, something forces Congress' hand. So again, what will the president accept as a consequence to force the, the Congress' hand?

MR. PLOUFFE: Well, again, it might be more enjoyable to negotiate this with you this morning. I, I can't get into a great amount of detail. But I think that, one, we have to make sure that you can agree on the initial set of spending cuts. The process for the committee, it's essential, we think, that the debt ceiling get extended off into the future so it doesn't hurt the economy. Then we want to make sure whatever enforcement mechanism is something, one, that if it were triggered, you know, you think the country could live with; but secondly, strong enough to compel folks to act. And I think that you, you see, this has been a healthy debate. I think the country's learned a lot about our debt and deficit problems. I think there's been some education here in Washington. And I think what's clear is, you know, where the president stands is where the American people stand, that if we're going to do another set of deficit reduction, over $1 trillion, they're going to insist it be balanced. Because if you're a middle-class family, if you're a senior citizen...

MR. GREGORY: But it's not going to be balanced. There's no tax increases in this.

MR. PLOUFFE: But...

MR. GREGORY: You--the president said it had to have tax increases, it must--had to be balanced.

MR. PLOUFFE: The committee--yeah.

MR. GREGORY: That's not what's in this deal.

MR. PLOUFFE: Well, listen, this committee's going to be charged with coming up with additional deficit reduction. There's no way to do it without smart entitlement reform and tax reform.

MR. GREGORY: So you only get to do potential tax increases as part of a second stage of spending cuts that a committee has to agree to?

MR. PLOUFFE: Well, the first stage--it's clear in this first stage what we're going to get is an extension of the debt ceiling...

MR. GREGORY: Right.

MR. PLOUFFE: ...you're going to get that first set of spending cuts over $1 trillion, and then you're going to get this committee that's going to be charged with reporting out, hopefully, a balanced deficit reduction plan.

MR. GREGORY: Well, what is healthy about this debate? I mean, you talk about another supercommittee. Seventeen months ago the president convened a debt commission, the proposals, recommendations from which were not acted on by the president or Congress. Now you're talking about another committee. Nobody's yet making the hard choices about two-thirds of the budget, which is entitlement spending. So what's healthy about this debate?

MR. PLOUFFE: Well, it's certainly not been a healthy debate in, in the short-term. I think the American people are sitting back and saying, you know, "I'm going through tough things in my life, and these folks are sitting there arguing with each other, unwilling to compromise, do tough things." Particularly the House Republicans this week. But I would say this. The president laid out several months ago a $4 trillion deficit reduction plan. What we were striving to do with the speaker of the House was a, a big deficit reduction package that wouldn't have a supercommittee, we would have done it right now. That wasn't possible. The speaker of the House, pulled by the right wing of his party, walked away from that. But the president's going to be committed over these next few months, as I--and I think members of Congress needs to be as well, that we need to finish the job here. And the way they're going to finish that job is to have a balanced deficit reduction package that doesn't harm the economy.

MR. GREGORY: Let me ask you some other pressing matters. I've spoken to top figures on Wall Street who say this is a code red day, all hands on deck preparing for a market shock as early as tomorrow. What is your message? What is the president's message to investors around the globe at this moment?

MR. PLOUFFE: Well, I think it is that we have to get this solved. Today is obviously a critical day. We have to give confidence that there is a pathway to make sure that we both reduce the debt ceiling--and let's not underestimate the debt reduction is an important part of this. So I think that...

MR. GREGORY: But that doesn't sound like a very certain message to investors. I mean, should they be assuaged by that?

MR. PLOUFFE: Well, listen, the best way we're going to assuage investors, the rest of the world, most importantly, the American people, is to solve this problem. And I think in the coming hours--and we're literally talking about in the coming hours--I think it's incumbent on congressional leaders to compromise that last bit so we can have a deal that, again, the House Republicans mysteriously, because I don't know anyone who watches this who would think this is a good idea, wanted us to go through this whole three-ring circus again in four or five months.

MR. GREGORY: Well...

MR. PLOUFFE: We're not going to do that because it's bad for the economy.

MR. GREGORY: If we have a default, who gets paid first? How does Treasury make that decision?

MR. PLOUFFE: Well, listen. At the appropriate point, the Treasury Department is obviously going to lay out for the American people how this would operate.

MR. GREGORY: When...

MR. PLOUFFE: Our focus right now is solving this problem. If we're not able to reach a deal, then Treasury's going to have to report to the American people exactly how this is going to happen.

MR. GREGORY: Chairman Mullen...

MR. PLOUFFE: Yes.

MR. GREGORY: ...is in Afghanistan. He told our troops fighting there he didn't know the answer to when and whether they would get paid. Will the president insist that if there's a default, that troops get paid?

MR. PLOUFFE: Again, the Treasury Department will--and by the way, what Admiral Mullen talked about, you know, it's outrageous that here we are, 60 hours away from the United States of America potentially defaulting for the first time, and the reason we're here is that, particularly Republicans in the House, but, but Republicans generally have been unwilling to compromise. So at the appropriate point, if we get to that point, the Treasury Department will lay out very clearly for the American people, most importantly for investors, folks around the world, exactly what would happen if we default.

MR. GREGORY: I want to be clear on what the president would accept. In terms of cuts, in the first state or the second stage, in other words, that--what's called in Washington a trigger, which means that whatever forces Congress' hands if they don't continue to cut government spending, something would happen. We know the president is open to tax increases automatically. Would he also accept a deal that would cut Social Security benefits or Medicare benefits if Congress doesn't act?

MR. PLOUFFE: Well, first of all, when you say open to tax increases, let's remember what the president's for: closing tax loopholes; making sure that millionaires and billionaires, large corporations, through tax reform contribute. What you see the Republican Party largely wanting to do is ask senior citizens, college students, the middle class to pay all the freight here. And people are outraged by that. Everyone's going to have to do their part here. So, in deficit reduction--and again, this next stage, the first stage is going to be some domestic spending cuts in Defense and non-Defense, that both parties largely can come to agreement on. Not easy, but a first stage. Second stage is going to be a discussion in Congress about things like tax reform and entitlement reform. Our view is things like Social Security and Medicaid, you know, they can't be part of the solution here unless you've got a balanced package that includes tax reform.

MR. GREGORY: So we're still at a stalemate when it comes to that, in terms of that second stage. Another option that's been talked about and there's been pressure from Democrats is invoking the 14th Amendment. This is the key piece of the 14th Amendment. "The validity of the public debt of the United States authorized by law shall not be questioned." The president could unilaterally raise the debt ceiling. Will he do that if it comes to that?

MR. PLOUFFE: Listen, we've been, we've been asked them question a lot. And I think particularly when you come to the closing hours of this crisis, a lot of people are suggesting off-ramps. There is no off-ramp here. You know, we...

MR. GREGORY: So the 14th Amendment is not an option.

MR. PLOUFFE: No. We, we've looked at that. The only way out of this is for Congress to act, for the Republicans in Congress to be willing to compromise a little bit. You know, the debt ceiling's been raised dozens of times historically. It shouldn't take, you know, a constitutional crisis for us to pay the bills on our credit card that Congress has already racked up.

MR. GREGORY: The backdrop for this, as you know, is an economy in trouble. The Wall Street Journal described it this way in terms of economic recovery. This was yesterday. "The government on Friday reported that the economy grew at a rate of just 1.3% in the second quarter, failing to bounce back from knocks earlier in the year. Estimates of first-quarter growth were also revised down to 0.4%. As a result, the pace of economic recovery has been one of the worst since World War II. ... That's particularly bad news as the economy confronts the threat of a default on the nation's debt." Is the Obama recovery much more like a bust?

MR. PLOUFFE: No. What, what also was reported this week is you went back three years and the depth of the recession the president inherited was even more severe than anyone realized. I mean, the worst since F.D.R. inherited the Depression. So we had a long, you know, we had growth in negative six, negative seven, just terrible. So what we have to do is--now, from those terrible depths we've made progress. We continue to see some positive job growth, but not nearly as rapid enough. First of all, this debt ceiling problem, it's not just harmed investors, it's clear it's harmed consumer confidence, business confidence, small and large. We have to remove this cloud. Secondly, Congress can do some things right now. We can pass trade deals that can help us compete. We can pass patent reform so that our innovators have an easier time getting their ideas to market. We can work together to build roads and bridges and put construction workers back to work. We can--we have a payroll tax looming, by the way, that would expire next year, which would be about $1,000 tax increase on every American if we don't pass it. So we've got to get through this debt ceiling for a lot of reasons, but the focus here in Washington has to centrally go back to how we're going to create jobs, how we're going to grow this economy.

MR. GREGORY: Before you go...

MR. PLOUFFE: Yeah.

MR. GREGORY: ...you are the president's top political adviser. As you look at what Washington has done, essentially a failure to govern, do you now think a third party is a viable alternative in the 2012 race?

MR. PLOUFFE: Well, that'll be up to the American people. Here's what I would say...

MR. GREGORY: Yeah, but you're, you're the expert inside the White House.

MR. PLOUFFE: Well, I can speak to this. I think that most Americans believe that the president has tried to tackle tough problems. I think they're clear that here is a president who was willing to do some tough things that obviously we took some criticism from our own party on. So he's walked the walk in terms of how we solve the deficit, someone who's clearly been willing to compromise. And what's interesting is the president, last Monday night in his speech to the nation and again Friday, asked the American people to reach out to Congress through tweets, through e-mails and calls and say, "Demand a compromise." And the reaction was overwhelming. I think people are very frustrated and they want their leaders, obviously, to have strong principles. But at the end of the day, as they're going through the struggles in everyday life, what they can't afford is their leaders to be engaged in a three-ring circus.

MR. GREGORY: Does...

MR. PLOUFFE: So...

MR. GREGORY: Does it open up a third party or not?

MR. PLOUFFE: Well, listen, you know, that'll be up to the American people. What I'm confident in is that the president's leadership is something that was rewarded in 2008. I think people think he's the one person here who's focused every day on solving problems, not trying to score political points. And that's going to be one of the reasons he's going to be re-elected in 2012.

MR. GREGORY: All right. We're going to leave it there. David Plouffe, we'll be watching. Thank you very much.

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