Obama: Still differences on debt, new talks Sunday

By Jim Kuhnhenn

Associated Press

Published: Friday, July 8 2011 2:00 a.m. MDT

House Speaker John Boehner of Ohio listens at left as President Barack Obama speaks during a meeting with Congressional leadership to discuss the debt, Thursday, July 7, 2011, in the Cabinet Room of the White House in Washington.

Pablo Martinez Monsivais, Associated Press

Enlarge photo»

WASHINGTON — With an August deadline for a budget deal to raise the nation's debt ceiling looming, President Barack Obama and congressional negotiators are looking at closing some tax loopholes and cutting popular social benefit programs as they work to reach an agreement between Republicans and Democrats.

With the two sides still far apart, Obama has called everyone back to the White House for a rare Sunday meeting.

The president met with the eight top Republican and Democratic congressional leaders for an hour and a half Thursday, hoping to bridge ideas held by the two sides — each considered untenable by the other. On Capitol Hill, Democrats appeared especially rattled that the discussions included proposals to cut spending for Social Security as well as Medicare and Medicaid.

House Democratic leader Nancy Pelosi opposes cutting the benefit programs and will have an opportunity to raise her concerns when she meets Friday with the president.

"We are not going to balance the budget on the backs of America's seniors," Pelosi said.

After dragging on for weeks, the top-level talks have entered a suspenseful endgame. The shape of an agreement remains in doubt as the nation moves closer to an Aug. 2 deadline to raise the government's debt ceiling.

Obama pushed for an ambitious deficit reduction plan of roughly $4 trillion, the biggest of three options he laid on the table. It would require sizeable tax revenues, which many Republicans oppose, and spending reductions for entitlement programs, opposed by many Democrats. But the idea of a potentially historic deal was well received by the meeting participants, officials said later, even though the details remained in dispute.

After Thursday's 90-minute session, Obama said Democrats and Republicans should be prepared to show their bottom-line demands when they return to the bargaining table Sunday.

The negotiating stakes are high. Without a deal on deficit reduction, Republican leaders say they don't have enough GOP votes to increase the nation's borrowing authority, raising the danger of the first ever U.S. default on its debts when the current $14.3 trillion debt ceiling is tapped out.

"Everybody acknowledged that we have to get this done before the hard deadline of Aug. 2 to make sure that America does not default for the first time on its obligations," Obama said. "And everybody acknowledged that there's going to be pain involved politically on all sides."

That leaves little time to agree on 10-year deficit reductions of $2 trillion to $4 trillion.

The major clash centers on how to reduce spending on major entitlement programs such as Medicare, Medicaid and Social Security, all prized by Democrats, and on tax changes that would close loopholes and end certain corporate breaks. Republicans insist that any tax changes be used to lower rates on corporations and individuals; Obama wants them also to generate more tax revenue.

Increasing the debt ceiling through the end of 2012 — a date favored by the White House — would require authorizing about $2.4 trillion in additional borrowing. House Speaker John Boehner has insisted on a 10-year deficit reduction figure that, at a minimum, matches the amount of additional borrowing. One aide to a lawmaker in Thursday's meeting said Obama made it clear he wouldn't sign a budget and debt agreement that didn't extend the debt ceiling until after the November 2012 presidential election.

In the meeting, Obama told the leaders that they faced three options — a small deficit reduction plan, a medium plan that would reduce deficits by $2 trillion over 10 years or a big agreement that would shoot for up to $4 trillion in deficit reductions over the next decade. Obama indicated he preferred the largest number.

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