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VOL. 35 | NO. 26 | Friday, July 1, 2011

Lawmakers visit White House for budget talks

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WASHINGTON (AP) — President Barack Obama sat down with leaders of Congress at a crucial deficit-reduction negotiating session Thursday as the White House signaled a willingness to reduce costs for major benefit programs like Social Security and Medicare while Republicans indicated they might consider new steps to raise revenue.

Obama met with the leaders of both parties around a table in the Cabinet Room as they struggled to reach a deal on raising the government's debt limit with less than four weeks remaining before the government faces the prospect of a first-ever default on U.S. financial obligations.

"I think there will be a spirit of trying to get results here," House Majority Leader Eric Cantor, R-Va., said early Thursday.

While discussions on trimming the costs of entitlement programs had centered on Medicare, the health care program for older Americans, the White House is revisiting a proposal raised earlier in the negotiations to change the inflation measurement used to calculate Social Security cost-of-living adjustments, thus reducing annual increases.

House Speaker John Boehner told reporters before leaving for the White House that proposals to reform the tax code are "under discussion" as part of budget talks with Obama, but the Ohio Republican promised that any such plans won't "raise taxes on the American people."

"We believe that comprehensive tax reform, both on the corporate side and the personal side, will make America more competitive, help create jobs in our country, and is something that is under discussion," Boehner said.

The White House signaled Wednesday that the president is aiming for deficit reduction closer to $4 trillion over 10 years — an ambitious number that would nearly double the roughly $2 trillion that had been at the center of negotiations. Negotiations are gaining urgency by the day, because Republicans are insisting on major cuts to the deficit as the price for approving legislation to maintain the government's ability to borrow money and stave off a market-rattling default.

Democratic and Republican officials familiar with the discussions said Thursday that Social Security was in the mix for potential cost savings. Reintroducing the retirement program to the talks is likely to cause anxiety among congressional Democrats who have insisted that Social Security does not contribute to the nation's deficit problems.

The officials spoke on the condition of anonymity because of the sensitivity of the talks. They stressed that no aspect of the deal had been accepted by either side.

Obama ignored a question about Social Security during a photo session at the beginning of the meeting.

One official said that an option under discussion would allow Republicans to make a commitment to overhaul and simplify the tax system that would lower individual and corporate tax rates while closing loopholes, ending some deductions and limiting other tax subsidies. Those changes could generate tax revenue and was central element of a deficit reduction plan proposed by a bipartisan commission early this year.

That discussion also included lowering the costs of Social Security, Medicare and Medicaid.

Amid media reports Thursday of Social Security's inclusion in the debt-cutting talks, Obama's chief spokesman, Jay Carney, pushed back.

"There is no news here - the president has always said that while Social Security is not a major driver of the deficit, we do need to strengthen the program," Carney said, providing that any such effort "doesn't slash benefits." His statement did not directly address the possibility of reducing annual Social Security increases by changing the inflation adjustments.

Two Democratic officials allied with Obama said the president believes it would be easier to win bipartisan support in the House and Senate for a deal that embraces larger deficit cuts closer to the $4 trillion over 12 years that Obama proposed in April.

The officials, speaking on the condition of anonymity to discuss the secret negotiations more freely, said the precise number was still in flux, but they said Obama would be making the case for more rather than less deficit reduction in his discussions with congressional leaders Thursday.

However, any larger figure would depend on agreement on a long-term deficit or spending cap, enforced by automatic spending cuts and, under Obama's proposals, a tax-increase "trigger" that would be tripped if targets were not met. Negotiations within the Biden-led group on the idea of spending caps and tax triggers had reached an impasse, however, a GOP aide familiar with the talks said.

The negotiations are the first official sit-down since last month, when House Majority Leader Eric Cantor, R-Va., left talks that had been led by Vice President Joe Biden, citing an insistence by Democrats on raising taxes.

But Cantor went out of his way Wednesday to make clear that he bolted the Biden group over an administration proposal to limit the ability of upper-bracket taxpayers and small businesses to claim deductions — and he signaled a willingness to consider closing some tax loopholes for businesses as part of a broader budget pact.

"If the president wants to talk loopholes, we'll be glad to talk loopholes," said Cantor, adding that any revenues raised from closing loopholes "should be coupled with offsetting tax cuts somewhere else."

On Thursday, Cantor said that any deal to avert a government default must include "reforms to the system" to show that Washington can manage the country's finances.

The Virginia Republican conceded in an interview that special interest loopholes in the tax code must be addressed. But he also said Republicans are being falsely accused of blocking agreement on a package of spending cuts necessary to produce enough votes to renew the Treasury's borrowing authority, which expires Aug. 2.

Cantor said differences between Democrats and Republicans over such issues as tax breaks for owners of corporate jets were not the factors behind his decision last week to walk out of deficit-reduction talks led by Vice President Joe Biden.

"There was a fundamental disagreement over whether we should raise taxes right now," he said.

His comments reflected important, if nuanced, flexibility by Republicans. His earlier position was that closing loopholes should wait for a comprehensive overhaul of the tax code. And he didn't rule out using loophole revenues to extend existing tax cuts instead of paying for new ones.

In the Senate, however, GOP leader Mitch McConnell was against the idea. "To sort of cherry-pick items in the context of this current negotiation at the White House strikes me as pretty challenging," he said.

After a pugnacious news conference last week, Obama struck a far softer tone Tuesday in inviting lawmakers to the White House.

But on Wednesday, Obama attacked Republicans as defenders of wasteful and unfair loopholes, such as subsidies for highly profitable oil companies or a break given to companies that purchase private jets.

"The debt ceiling should not be something that is used as a gun against the heads of the American people to extract tax breaks for corporate jet owners or oil and gas companies that are making billions of dollars," Obama said during a town hall that featured questions posed through the online social network Twitter.

Thursday's session comes several days after Obama and House Speaker John Boehner, R-Ohio, met secretly at the White House to try to end political posturing and get negotiations back on track.

Cantor was interviewed on CBS's "The Early Show" and NBC's "Today" show.

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