Debt-Ceiling, Deficit Talks Push Sides Further Apart

Short-term deal might be harder political sell than sweeping package.

July 4, 2011, 1:08 PM

WASHINGTON, July 4, 2011 -- The canceled congressional recess gives the two sides in deficit negotiations more time to talk it out.

But a lack of talk hasn't been the problem. Democrats and Republicans are talking past each other, or, at least, aren't listening to the other side in high-stakes negotiations that might make the unthinkable come to pass when it comes to the nation's debts.

The two sides are moving further apart as the deadline for action on the debt ceiling draws closer. The biggest avenues to shrinking the deficit -– tax increases and cuts to entitlement programs -- are being blocked by Republicans and Democrats, respectively.

President Obama used a news conference last week to cast the fight as a choice between critical services for the vulnerable and tax breaks for the rich. That means more lines being drawn in the negotiating sand, not fewer.

Meanwhile, Sen. John McCain of Arizona -- who opposed the original Bush tax cuts and has often been attacked inside his party for challenging GOP orthodoxy -- summed up the Republican negotiating position on CNN Sunday.

"The American people, as the president describes it, administered a shellacking," he said of the Democrats' devastating November election losses. "They don't want compromise. They want us to balance the budget.

"They want us to stop mortgaging our children and our grandchildren's futures. And they don't think they need their taxes raised, and I don't either."

The impasse has leading officials in both parties conceding privately that a default on the nation's death is a possible, though not yet likely, outcome. The Treasury Department has said that Aug. 2 is the date when inaction on the debt ceiling will force the United States to begin defaulting on payments owed. Realistically, a deal has to be reached about 10 days earlier than that to ensure that it becomes law in time.

In that context, there's little to no chance of a major breakthrough that would extend the debt limit by $2 trillion, enough to get the nation through 2012, with a corresponding amount of deficit reduction.

A more likely outcome is a small increase to the debt limit of a few hundred billion dollars, with an agreement to limit spending by a similar amount. That would throw the issue back in front of Congress at least one more time before the 2012 elections, a prospect some Republicans relish because it would leave the president defending more borrowing again before Election Day.

But the political obstacles to a short-term deal are in some ways even greater than they would be to a more sweeping agreement. The new class of Republican lawmakers came to Washington with the express purpose of not putting off big decisions on spending and debt any longer, and won't be inclined to support a deal that kicks that can into another year.

"The problem with a mini-deal is we have a maxi-problem," Sen. John Cornyn, R-Texas, said on "Fox News Sunday."

Of course, any deal reached by the president and congressional leaders needs to be voted on by the full House and Senate. As previous votes on spending and debt have made clear, that's no mere formality.

Obama Critical Player on Debt

House Speaker John Boehner of Ohio knows that a chunk of his Republican caucus will likely oppose any increase in a debt ceiling, meaning he needs a significant number of Democrats to jump on board. That math doesn't change substantially whether the deal is a short- or long-term compromise; those inclined to vote for or against a debt-ceiling increase are poised to do so based on principle rather than particulars.

In the Senate, talk of a filibuster means at least seven Republicans need to join Senate Democrats in pushing legislation through. And some Democrats who are up for re-election next year will need significant coaxing before they vote for something seen as authorizing more borrowing.

That political mess brings things back to the White House. Obama remains the critical player whose principles and concessions will do the most to define the contours of a compromise, or a lack thereof.

In the meantime, the talking continues, with negotiators walking closer to the edge of a cliff that any of them think comfortable.

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events