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Bob Woodward: Fiscal 'Day of Reckoning' Is Coming

Bob Woodward
Jim Watson | AFP | Getty Images
Bob Woodward

For the first time since the Arab Spring, the country’s attention has shifted from the troubled U.S. economy to foreign policy after the assassination of the U.S. ambassador to Libya, Christopher Stevens. Republican nominee Mitt Romney wasted no time skewering President Obama over what he calls the politics of apology. But the core issue facing America is still the economy.

“Getting this country’s financial house in order should be one of the main topics of this year’s presidential election,” author Bob Woodward told The Fiscal Times. “The candidates should be asked about it. They should be pressed to be very specific about it. It is the one thing that’s going to truly matter for generations to come, for our kids, our grandkids.”

Woodward’s new book on the Obama presidency, "The Price of Politics," deals at length with the conflicting philosophies of the two parties regarding government spending. Woodward said, “This election turns on a lot of things. In the end, it’s going to turn on the economy. The question most people have about Obama or Romney is: Can they do a better job of getting the financial house of the U.S. government in order? Because, after protecting the country, that is the key job for the president – to get the nation’s fiscal house in order.”

At the heart of Woodward’s fly-on-the-wall account is the failed negotiating effort last summer between Obama and House Speaker John Boehner (R-Ohio) to break the stalemate over raising the federal debt ceiling over $14.3 trillion. Obama asked the Republicans to agree to new revenue increases. Boehner wanted Obama to agree to large spending cuts.

The two men seemed to be approaching a deal that included about $800 billion in new revenue – a major concession on Boehner’s part. But in the final negotiations, Obama surprised the speaker with a new request – or a “demand, depending on who you believe, or who had it right,” says Woodward – for an additional $400 billion in new revenue. That’s when things fell apart. Woodward, 69, shared candid thoughts about the fallout and what this bodes for the election, and beyond.

‘Monumental Communications Lapse’

The Fiscal Times (TFT): Neither Obama nor Boehner could overcome the convictions of their parties, of their political sides, you say. For the country’s sake, why weren’t they able to reach agreement?

Bob Woodward (BW): First, it’s politics. Second, it’s the way they negotiated. The dispute over the $400 billion – they did it on the phone. The president just picked up the phone and calls Boehner, for one of the most important phone calls of his presidency. It’s not very far from the Capitol to the White House – about a mile, maybe more – and he should’ve called him down and said, “Bring your staff, I’ll bring my staff, and this is what I want.” But it was a monumental communications lapse. And it could have been avoided by realizing, This is very serious, we want to fix it and let’s not get the wires crossed. But the wires got crossed in a tragic way.

TFT: Why wouldn’t Obama have called him to the Oval Office?
BW: The sequence [of events] had its own drama. They’re working out the deal that weekend, in the middle of July. I asked Obama about it and he said, “We had a framework.” Boehner [felt] they had a deal, that they were really very close. [Eric] Cantor [the House Majority Leader] feels they were not that close. But they were on the path to some sort of agreement. Then the Gang of Six comes in and says, “Oh, we can do a deficit reduction plan that has more revenue.” David Plouffe, the political adviser in the White House, determines this could be a watershed moment… Finally on Thursday, the president calls Boehner and says, “Let’s do $400 billion more in revenue.” So the process got fouled up. People were reacting to political moments and to political opportunities. There was some impulsive decision-making going on.

‘We Won’t Have Enough Money to Pay the Bills’
TFT
: Americans are still “left with a struggling economy,” you conclude, because things could not be worked out. We’re approaching the fiscal cliff –
BW: Not just the fiscal cliff. We are approaching a time when the congressional authorization to borrow more money will be exhausted. We’re going to be back in the soup with the same problem of not having enough money to pay the bills.

‘It’s Like Virginity: Once You Default, You Don’t Get It Back’
TFT
: How did you choose your book’s title, "The Price of Politics"? Is it a reference to the price we’re all going to pay for solutions our political leaders have not yet reached?
BW: There is a price [to pay]. We’re dancing on the sharp edge of a razor blade, as I’ve said before. We could fall off and the result would be calamitous. In the book, if you look at all the things [Tim] Geithner [the Treasury Secretary] was saying in the meetings – that a potential default could trigger a depression worse than the 1930s and that it would be indelible… It’s like virginity. Once you default, you don’t get it back.

‘A Divided Man’
TFT
: How does Obama compare in broad terms to other presidents you’ve covered?
BW: Well, he’s very, very smart. But there’s a “divided man” quality to him. He tells people, “I’m a blue dog. I want fiscal restraint and order.” At the same time, as he told me, “I don’t want to cut entitlements in any way that would hurt vulnerable populations.” So, there isn’t the quality of, “This is how we’re going to do it.” When I was in the Navy in the ‘60s an executive officer had a plaque in his office that said, “He who does not know to which port he is sailing has no favorable wind.” Sometimes it is not clear whether Obama is sailing to the fiscal restraint port – or to the “protect-the-entitlements-at-all-costs” port.

Friendly Persuasion
TFT
: Is he strong enough to stand up to the Democratic congressional leadership when he needs to?
BW: The book shows that he doesn’t control [Sen. Nancy] Pelosi [former Speaker of the House] or [Sen. Harry] Reid [Senate Majority Leader]. They were resistant to cutting any entitlements. I don’t know that he could have gotten their agreement had [Obama and Boehner] reached a deficit-reduction deal – just as it was pretty evident Boehner was going to have trouble with Cantor and the Tea Party Republicans.

Day of Reckoning Will Be Worse’
TFT
: A week ago Romney criticized the defense sequestration cuts agreed to in last summer’s debt-ceiling deal. Won’t this hurt him, since it goes against what Paul Ryan, his running mate and other GOP leaders agreed to last year?
BW: I just don’t know. It depends. Congress can do whatever they want, and it depends on how binding the sequestration agreement from the Super Committee is. They could postpone it like lots of these things, like the Bush tax cuts. So the day of reckoning will only be worse, because there will be a day of reckoning… It’s sad for the country that these things weren’t fixed. They weren’t ever going to be fixed completely last year or this year, but at least they were on a path toward some stability. [They were doing] several little things, like increasing the Medicare age from 65, up to, eventually, 66 or 67. You could do that slowly, you could start in 3-5 years or more, but at least it would be saying, “We’re going to do something.” But everything has been postponed that's hard.

Fiscal Commission Not ‘Doomed from the Start’
TFT
: Was the Bowles Simpson fiscal commission doomed from the start? Reading between the lines of your book, it did seem that way.
BW: No, I don’t think it was doomed from the start. But the president told me he didn’t go along with the Simpson Bowles plan because they were going to eliminate or reduce very popular deductions, things like the home mortgage interest deduction, charitable deductions, health insurance deduction, and others. These, as the president put it, were “wildly popular,” and they wouldn’t pass Congress, and I think he’s probably right on that. You would have to do these things slowly – and of course Simpson Bowles really wasn’t specific about how much of that was going to be done.

TFT : So it’s your belief that Obama was sincerely looking for that commission to produce ideas and solutions that could be implemented?
BW: Yes, I think so. He told me he’d “willingly lose an election” if he could solve these fiscal and spending and tax issues in the right way. Now, that’s rhetoric – and he doesn’t jump in his chair when he says that, but it’s consistent with the position he’s taken, at least rhetorically. When it gets to the hard moments, he doesn’t get there. Nor do the Republicans.

‘I’m Politically Neutral… I Take Politicians Seriously’
TFT
: How are you able to do what you do – to get very high-level political leaders to speak to you, on the record, off the record – for so many years?
BW: I have the luxury of time. I can get a little something and then go back, and go back again. And I have no politics in this. I’m politically neutral and I want to make sure that people have their say. There’ve been some complaints about other books and this book, that, “Oh, it’s so long, and it’s meetings, and it’s positions that people take” – but I want to make sure that what they've concluded and said and done is fully reflected. And I try to take them as seriously as they take themselves.

TFT : In the world of the web, with instant tweets and everything else, how has journalism changed? Can journalists still be objective today?
BW: I think you can still be objective. But everything moves so fast.

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