Revenue, Medicare spending at heart of DC deficit talks

Associated Press

WASHINGTON

To reduce government red ink, Republicans are willing to raise government revenues but not increase taxes. Congressional Democrats would accept reductions in Medicare spending, yet no cuts in benefits.

Parsing these distinctions appears to be key to the deficit-reduction talks headed by Vice President Joe Biden, particularly with Republicans eager to protect their anti-tax credentials in 2012 and Democrats ready to campaign aggressively against a House GOP plan to remake Medicare.

In recent days, Senate Republicans have voted to end the government’s subsidy of ethanol, raising questions about other tax breaks that might be eliminated as a way to reduce deficits.

On the other side of the aisle, Democrats are prodding President Barack Obama to rule out Medicare benefit cuts as part of any agreement. In private meetings, he has yet to do so, according to numerous officials.

The negotiators met Tuesday as they accelerated efforts to line up a deficit-cutting deal that would accompany legislation raising the nation’s $14.3 trillion debt limit.

“We are meeting every day for the remainder of this week,” Treasury Secretary Tim Geithner told business executives before heading to the Capitol.

Geithner has warned that the government could be forced into its first default on obligations if there is no increase in the debt limit by Aug. 2, with catastrophic consequences for a struggling economy.

Increasingly in recent days, officials in both parties say that rather than a formal agreement, the Biden-led talks are likely to result in a consensus list of options for cutting deficits. The negotiations would then largely, if not entirely, be turned over to President Barack Obama, House Speaker John Boehner, Senate Majority Leader Harry Reid, House Democratic leader Nancy Pelosi and Senate Republican leader Mitch McConnell, perhaps as soon as the end of the week.

The administration has told lawmakers that a $2.4 trillion increase in borrowing authority is needed to get through the 2012 elections, and Boehner has said deficit cuts must be higher than any debt limit increase.

In the interim, House Republicans also have discussed the possibility of drafting and passing their own package of cuts, coupling it with a debt limit increase of unknown size and sending it to the Democratic-controlled Senate.