White House Debt Talks Make Little Progress

WASHINGTON, July 10, 2011 -- President Obama told congressional leaders tonight that he is prepared to make the tough decisions on entitlement spending to reach a deal on raising the debt ceiling and cutting the deficit, a Democrat familiar with the negotiating process told ABC News.

But if Republicans are not willing to do the same regarding taxes, the president asked them during a meeting at the White House, what is their alternative?

After meeting for 75 minutes, congressional leaders will be back at the White House Monday afternoon to continue negotiations.

Monday morning the president will hold a news conference on the matter, making his case to the American people about why tax rates for wealthier Americans and corporations need to be raised as part of a deficit reduction package of at least $4 trillion over the next decade.

Republicans say House Speaker John Boehner, R-Ohio, sought a similarly sized package that would reduce and reform entitlement spending and to cut and cap discretionary spending. The bill -- which would also raise the debt ceiling through November 2012 -- would also contain language committing to principles of tax reform, which key House and Senate committee chairmen would then turn into actual numbers.

Talks broke down, Republicans said, when the president would not commit to the principle that everyone's tax rates would come down.

Also in tonight's meeting, Obama again took the idea of a short-term debt ceiling fix off the table. Whatever Congress passes in terms of deficit reduction, the debt ceiling needs to be raised until after November 2012, a Democratic briefing on the discussions told ABC News.

The president also told congressional leaders to come back Monday with a view on what could pass both the House and the Senate.

A Democratic aide familiar with the process said that Boehner "put on the table letting the Bush tax cuts for the wealthy expire and banking the revenue and then he bailed. The speaker couldn't take the heat from the Republican caucus."

Although Boehner warned Saturday evening that the two sides should "focus on producing a smaller measure, based on the cuts identified in the [Vice President Joe] Biden-led negotiations," Democrats involved in the negotiations say they still prefer to go for the "grand bargain" that would cut closer to $4 trillion over 10 years.

"We came into this weekend with the prospect that we could achieve a grand bargain," House Minority Leader Nancy Pelosi said in a statement following the meeting. "We are still hopeful for a large bipartisan agreement, which means more stability for our economy, more growth and jobs, and more deficit reduction over a longer period of time.

"This package must do no harm to the middle class or to economic growth," the California Democrat said. "It must also protect Medicare and Social Security beneficiaries, and we continue to have serious concerns about shifting billions in Medicaid costs to the states."

A senior aide to the speaker said Boehner told the leaders that he still "believes a package based on the work of the Biden group is the most viable option at this time for moving forward."

"The speaker restated the fundamental principles that must be met for any increase in the debt limit: spending cuts and reforms that are greater than the amount of the increase, restraints on future spending, and no tax hikes," the aide said. "The president agreed with the speaker that their previous talks did not produce any agreement. The group agreed to continue talks in the coming week."

There was a lot of talk tonight about what the Biden-led group had actually come up with, in terms of a "medium" sized deficit reduction plan.

The president told those who participated in that meeting to stop suggesting they had achieved $2.3 trillion in deficit reduction over 10 years.

Biden also said some of the cuts were conditioned on tax increases, so that's another wrinkle to be worked out. The vice president suggested the speaker might move off of his dollar-to-dollar debt limit increase-to-spending cut framework, but Boehner quickly shot down that idea.

Sources said that during the meeting Obama pointed out that Republicans appeared to be walking away from reducing the deficit and Boehner told him he can't go for the big deal because there is not time to do it and no path to gain enough support to pass it through the House.

The Democratic aide said Democratic leaders involved in the discussions -- Obama, Senate Majority Leader Harry Reid, Sen. Dick Durbin, Pelosi, Minority Whip Steny Hoyer -- all still wanted to go for a big deal that includes tax reform along with entitlement reform.

"Democrats continue to put entitlement reform on the table, but Republicans are still refusing to take yes for an answer because of their ideological adherence on [tax] revenues," the aide said.

Another senior Democratic aide said that House Majority Leader Eric Cantor and Sen. Jon Kyl -- both the deputy leaders in their respective Republican conferences -- "were really dominating the conversation" and Boehner and Senate Minority Leader Mitch McConnell were both "rather quiet" compared to past meetings.

The aide said it appeared that Cantor was speaking for House Republicans, creating an awkward chemistry in the room.

But just before the meeting began, as he was leaving the Capitol to head to the White House, Cantor said he and Boehner are "in exactly the same place."

"We are and we have been," Cantor said. "He's never said he's for tax increases, and the White House just proved that in order to do what it was that we want to do, to restructure the entitlement picture in terms of the fiscal soundness, they need tax rate increases and we're not for that, so the speaker is exactly where I am. We need 218 votes to pass this thing."

The Democratic aide said Pelosi warned Boehner and Cantor that if they pass something through the House that the president can't sign, they should not depend on Democratic votes to help increase the debt limit.