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Senate Majority Leader, Harry Reid

Nancy Pelosi, House Minority Leader

Rep. Raul Grijalva (D-Ariz.), Congressional Progressive Caucus co-chairman

Democrats Opposed to Obama's $4 Trillion Proposal Cutting Medicare & Medicaid

WASHINGTON & SANTA FE, NM (By Laurie Kellman, AP) July 10, 2011 — President Barack Obama hasn't given up on getting congressional leaders to accept a $4 trillion debt reduction deal that Republicans have rejected for its tax increases and Democrats dislike for its cuts to programs for seniors and the poor, administration officials said hours before talks resumed today.

"He's not someone to walk away from a tough fight," presidential chief of staff William Daley said. "Everyone agrees that a number around $4 trillion is the number that will ... make a serious dent in our deficit."

But House and Senate Republican leaders now say the largest of three proposals under consideration would not pass the GOP-led House because of its tax increases, an abrupt shift in negotiation over the terms of raising the nation's debt ceiling before an Aug. 2 deadline.

House Speaker John Boehner, R-Ohio, announced late Saturday that he was rejecting that proposal. Heading into the talks at 6 p.m. EDT, the top Senate Republican, Mitch McConnell of Kentucky, suggested the deal was dead.

"I think it is," McConnell said. Raising taxes amid 9.2 percent unemployment, he added, "is a terrible idea. It's a job killer."

The back-and-forth on the Sunday morning talk shows came hours before Obama and eight lawmakers of both parties were to convene at the White House over a plan to raise the nation's borrowing capacity from $14.3 trillion before next month's deadline, when administration officials say the nation would default on its debts.

Republicans have demanded that any plan to raise the borrowing limit be coupled with massive spending cuts to lighten the burden of government on the struggling economy. Higher taxes, Republicans have said from the start, are deal-killers if not offset elsewhere.

But Obama has a long way to go to satisfy lawmakers in his own party, too. Many Democrats are unnerved by the president's $4 trillion proposal because of its changes to Medicare and Medicaid.

Political pain is part of the deal, too, and should be worth bearing, Daley said, adding that Obama was calling on lawmakers to "step up and be leaders."

He cast Obama as uninterested, for now, in two more modest proposals to raise the debt limit for a shorter time, in exchange for smaller spending cuts. But Daley and Treasury Secretary Timothy Geithner used rhetoric that appeared to acknowledge the prospects for the $4 trillion deal could be in doubt.

"We're going to try to get the biggest deal possible," Geithner said.

He cautioned that a package about half the size of the one Obama prefers would be equally tough to negotiate because it, too, could require hundreds of billions in new tax revenue.

Expectations for Sunday's meeting took an abrupt turn after Boehner informed Obama that a package of about $2 trillion identified but not agreed to by bipartisan negotiators was more realistic.

In a statement, Boehner said: "Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes."

A bipartisan group of lawmakers led by Vice President Joe Biden had already identified, but not signed off on, about $2 trillion in deficit reductions, most accomplished through spending cuts.

"I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase," Boehner said.

After holding a secret meeting with Boehner last weekend, Obama and aides said they believed an even bigger figure was attainable if both parties made politically painful, but potentially historic, choices.

A Republican official familiar with the discussions said taxes and the major health and retirement entitlement programs continued to be sticking points.

Obama wanted Republicans to accept closing some corporate tax loopholes and subsidies to corporations, ending a tax friendly inventory accounting system for businesses, as well as reducing the value of tax deductions for wealthy taxpayers.

A senior administration official said the discussion on taxes broke down over the administration's desire to have the wealthy pick up a bigger share of the tax revenue load than Republicans were willing to accept.

The official, speaking on the condition of anonymity because of the sensitivity of the negotiations, said the $2 trillion to $2.4 trillion in deficit reduction identified by the Biden-led negotiations remains under negotiation and will also require some new tax revenue of up to $400 billion.