Bloomberg News

Obama, Congress Leaders to Tackle Debt After Republican Exit

June 23, 2011

(Updates with new spending cut figure from Cantor spokesman in ninth paragraph.)

June 23 (Bloomberg) -- President Barack Obama likely will directly engage in talks on cutting budget deficits, his spokesman said, after a deadlock over taxes caused two Republicans to drop out of negotiations led by Vice President Joe Biden.

House Majority Leader Eric Cantor, a Virginia Republican, cited an “impasse” over tax increases in announcing that he wouldn’t attend today’s planned negotiating session. Joining him in refusing to go was Senator Jon Kyl, an Arizona Republican. They called for Obama to take the lead in the talks.

The move caught most Democrats by surprise and raised the prospect that the Biden-led talks could collapse over the tax issue. Republicans insist on major government spending cuts -- and no tax increases -- before they will agree to raise the nation’s $14.3 trillion debt ceiling. The Treasury Department says the limit must be raised by Aug. 2 or the U.S. will risk defaulting on its obligations.

From the beginning, “the goal of these talks was to report our findings back to our respective leaders,” Biden said in a statement. “The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support.”

Biden said the talks are “in abeyance” for now and that “we stand ready to meet again as necessary.”

‘Giving Up’

Senate Majority Leader Harry Reid, a Nevada Democrat, said it appeared that Republicans were “giving up” on the Biden-led talks, held periodically since May 5. Today’s session was canceled after the announcements by Cantor and Kyl.

“It’s in the hands of the speaker and the president and, sadly, probably me,” Reid said. House Speaker John Boehner, an Ohio Republican, met with Obama yesterday “to discuss a variety of issues,” White House press secretary Jay Carney told reporters.

Participants in the negotiations between White House officials and six lawmakers, including four Democrats along with Kyl and Cantor, had been aiming for the broad outlines of a deficit-cutting plan this week or next.

Cantor’s spokesman, Brad Dayspring, said the lawmaker notified Biden of his decision before publicly announcing it. Because the group had made progress in identifying “at least $2 trillion” in cuts, “Eric is convinced there is a foundation for an agreement,” Dayspring said.

Cantor’s View

Cantor said he found untenable Democrats’ push for a variety of revenue increases to help reduce deficits.

“The Democrats continue to insist that any deal must include tax increases,” Cantor said in a statement announcing his decision not to participate in the talks. “There is not support in the House for a tax increase.”

“If we are going to meet the president’s timetable to come to an agreement at the end of this month,” Obama “has to engage,” Boehner told reporters. “I would expect to hear from him.”

Kyl, his party’s No. 2 Republican Senate leader, said in a joint statement with Senate Minority Leader Mitch McConnell of Kentucky that Obama “needs to decide between his goal of higher taxes, or a bipartisan plan to address our deficit.”

Senate Finance Committee Chairman Max Baucus of Montana, one of the Democratic negotiators in the Biden group, said talks can’t continue without the Republicans because “you need bipartisan support to get a durable deal.”

Democratic Demand

Reid and other Democratic leaders today renewed their demand that tax increases be included in any final deal. They also said an agreement should include some spending increases for infrastructure, clean energy and other programs to boost the economy.

“I don’t think the principles we have laid out will change,” Representative Chris Van Hollen of Maryland, a Democratic negotiator. Democrats have proposed eliminating tax breaks for businesses and wealthy individuals to help raise more revenue.

“You can raise revenue without changing” tax rates “by eliminating some of the deductions and tax preferences,” Van Hollen said.

Carney, in his comments aboard Air Force One, said Obama “does not support an approach that provides for a $200,000 tax cut for millionaires and billionaires paid for by a $6,000-a- year hike in expenses and costs for seniors. And he believes the American people support him in that.”

Gang of Six

The bipartisan push for consensus on deficit cuts has had other setbacks. Last month, Republican Senator Tom Coburn of Oklahoma bowed out of debt negotiations among a separate group of six senators seeking a long-term deal on entitlement programs such as Medicare and taxes. He hasn’t returned to the talks by the so-called Gang of Six.

One member of that parallel effort, Senate Budget Committee Chairman Kent Conrad of North Dakota, said he agreed with Republicans that the final agreement on a debt package will have to be made by Obama and the top congressional leaders. “At some point, obviously, the very top leadership has to be in on these decisions,” he said.

Obama and Biden met today in the Oval Office with House Democratic leaders, including Minority Leader Nancy Pelosi of California, to discuss their status. The two Democratic House lawmakers in the Biden group -- Van Hollen and James Clyburn of South Carolina -- took part.

“Yes, we do want to remove tax subsidies for big oil, we want to remove tax breaks for companies that send jobs overseas,” Pelosi said later at her weekly news conference. “I don’t know whether that’s a reason to walk away from the table when we’re trying to find a balanced approach.”

Too Little

On the Senate floor today, McConnell said Obama has done too little to help guide the talks. McConnell also said the negotiations should focus only on spending cuts and not tax increases.

“Where is he?” McConnell said of Obama. “What does he propose? What is he willing to do to reduce the debt and to avoid this crisis that’s building on his watch? He’s the one in charge. I think most Americans think it’s about time he started acting like it.”

--With assistance from Kate Andersen Brower, Nicholas Johnston, James Rowley and Brian Faler in Washington. Editors: Don Frederick, Laurie Asseo.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Heidi Przybyla in Washington at hprzybyla@bloomberg.net.

To contact the editor responsible for this story: Laurie Asseo at lasseo1@bloomberg.net


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