Boehner says debt talks scaled back over tax rift

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http://news.yahoo.com/boehner-says-broad-debt-deal-unlikely-003256385.html

Boehner says debt talks scaled back over tax rift

By Caren Bohan and Andy Sullivan | Reuters – 7 hrs ago

WASHINGTON (Reuters) - A broad $4 trillion deal on U.S. deficit reduction

appeared out of reach on Saturday as Republican leader Boehner cited a rift

with the White House on taxes and proposed pursuing a more modest package.

" Despite good-faith efforts to find common ground, the White House will not

pursue a bigger debt-reduction agreement without tax hikes, " Boehner, the

speaker of the House of Representatives and the top Republican in Congress, said

in a statement.

" I believe the best approach may be to focus on producing a smaller measure. "

Boehner and President Barack Obama, who hoped to bolster his bid for re-election

in 2012 with the achievement of a historic deficit-reduction package, spoke

about the negotiations by phone on Saturday.

On the eve of a meeting between Obama, Boehner and other congressional leaders

at the White House on Sunday, staff for both Republicans and Democrats have been

working through the weekend.

Obama and Boehner had both set their sights on an ambitious $4 trillion plan,

but Boehner's abandonment of the bigger goal means the negotiations will likely

now focus on a package that would cut the deficit by more than $2 trillion over

a decade.

An aide to Obama said the president would not back off in his efforts to solve

U.S. debt problems and will make the case to congressional leaders in talks on

Sunday for taking on " this critical challenge. "

" We need a balanced approach that asks the very wealthiest and special interests

to pay their fair share, " White House Communications Director Dan Pfeiffer said

in a statement.

The White House needs to secure a deal on deficit reduction to clear the way for

an increase in the $14.3 trillion debt ceiling before a deadline of August 2,

when the Treasury has warned the United States faces risk of a default. The

White House and private economists say a default could push the United States

back into recession and trigger global financial chaos.

BALKING AT TAX INCREASES

Democrats want to shield popular domestic programs from huge cuts and say that

any deal must include increases in tax revenue. Many Republicans have said they

would not support a package that includes any tax increases.

A $4 trillion deficit reduction plan would have involved reining in spending on

the Social Security retirement program and Medicare, the government-run

healthcare program for the elderly. Many in Obama's Democratic Party oppose such

cuts.

Aides to Obama and Boehner were discussing revenue increases that would have

been achieved in part by a streamlining of the tax code. Democrats were seeking

$1 trillion in additional revenue, an increase that many rank-and-file

Republicans appeared loath to support.

One Republican familiar with the deficit talks said taxes and cuts in benefit

programs were both sticking points.

" The White House would not agree with the core elements of tax reform proposed

by the speaker, " the Republican source said. " A gulf also remains between the

speaker and the White House on the issue of medium- and long-term structural

reforms. "

Leana Fallon, an aide to House Republican Leader Cantor, said the tax

increases Democrats wanted " cannot pass the House " and urged that the talks

focus on a framework for between $2 and $2.5 trillion in cuts discussed in

meetings led by Vice President ph Biden during May and June.

Democratic Representative Van Hollen blamed the abandonment of a bigger

deficit-reduction goal on a " Republican fixation with protecting tax breaks for

corporate special interests and the very wealthy. "

The Biden talks had identified savings of between $1.9 trillion and $2.7

billion. Republicans want an agreement for at least $2 trillion in cuts as the

price for a debt limit increase that would be big enough to accommodate the

nation's borrowing needs through the 2012 election.

But even with a scaled-back goal, it might still be difficult to resolve the

differences over taxes. At a minimum, Democrats want to close enough tax

loopholes to bring in $400 billion in new revenue.

Republicans want any elimination of tax breaks to be offset by cuts elsewhere.

(Additional reporting by Matt Spetalnick; Editing by Walsh)