GOP senator drops out of deficit negotiations

A top Republican senator dropped out of the “Gang of Six” deficit reduction talks Tuesday, a blow to the nearly five-month effort to broker a bipartisan deal that now shifts attention to other fronts.

Sen. Tom Coburn of Oklahoma said talks had hit an impasse. The group had met for several hours late Monday, but Coburn ran into resistance when he proposed making cuts to Medicare that were considered unacceptable, said sources close to the talks.

Losing the conservative lawmaker is a blow to the group of six senators that many in Washington had hoped could bridge the divide between Democrats and Republicans to reduce the country’s alarming national debt.

The nation hit its nearly $14.3-trillion debt limit this week, and Republicans are demanding $2 trillion in spending cuts in exchange for their votes to increase the debt limit and avoid defaulting on obligations.

The setback shifts attention to the closed-door negotiations being led by Vice President Joe Biden and congressional leaders to reach agreement on budget cuts. Treasury officials have said the nation will default on obligations if its borrowing capacity is not increased by Aug. 2.

Coburn “is disappointed the group has not been able to bridge the gap between what needs to happen and what senators will support,” said a statement from spokesman John Hart. “He has decided to take a break from the talks.”

Also Tuesday, a top GOP negotiator in the talks with Biden said that as much as $150 billion in spending reductions had been identified as potential common ground between the White House and congressional representatives.

Sen. Jon Kyl (R-Ariz.) declined to outline specific areas of agreement, but said negotiators had found commonality between the president’s proposed 2012 budget and the plan passed by House Republicans.

“You first look at the things where there might be some overlap between our budgets and their budgets,” said Kyl, the Senate Republicans’ chief negotiator in the talks. “We’re discussing in the magnitude of $150 billion in cuts.”

Overlap could include possible reductions in agricultural subsidies, federal employee pension plans and an expansion of the Federal Communication Commission’s spectrum auction authority.

Both sides have also indicated privately that the Medicaid health program for low-income Americans and the disabled is also an area for consideration for cuts.

Finding possible agreement on $150 billion in budget cuts is far from the more than $2 trillion in budget reforms that would be needed over the next several years to meet House Speaker John A. Boehner’s goal. He has demanded that spending reductions be greater than the amount of additional borrowing authority needed to keep the country from default.

A $2-trillion increase in the debt limit would allow borrowing to continue until after the 2012 election.

Tax policy remains a dividing line as Republicans insist that any savings generated from closing tax loopholes be used for tax reductions rather than deficit reduction.

Democrats have argued that new tax revenue could be used to close the deficit gap.

Senate Majority Leader Harry Reid (D-Nev.) said Tuesday that Democrats would push to include as part of the talks their proposal to end tax breaks for the big five oil companies. The legislation died Tuesday in the Senate.

Both Democrats and Republicans agree that $4 trillion in deficit reduction — on par with the president’s fiscal commission — is needed to reduce the nation’s debt load.

The Gang of Six senators had been formed by Republican Sen. Saxby Chambliss of Georgia and Democratic Sen. Mark R. Warner of Virginia as a way to pursue the strategy of cutting spending and increasing taxesoutlined in the fiscal commission report.

Coburn had been an outlier in his party for agreeing to tackle both tax hikes and spending cuts to rein in debt.

But his proposal Monday to make immediate cuts to current Medicare recipients was deemed too extreme, sources said. Even the GOP budget’s privatization of Medicare exempts the current generation of seniors.

The group met again Tuesday afternoon without Coburn, and plans to keep its previously scheduled Wednesday meeting.

“Our fiscal challenges are too great to stop working toward a comprehensive, bipartisan solution,” Warner said. “I intend to keep working in good faith on these issues because we have made too much progress to stop now.”

But Chambliss indicated that though the group was still meeting, it would not continue with the lopsided makeup.

“We won’t operate as five of us,” the Republican said. “I want Tom Coburn to be part of this.”

Sen. Mitch McConnell (R-Ky.), the minority leader, has made it clear that he considers the White House talks, not the Gang of Six, as the forum for a resolution.

“With all due respect to the Gang of Six, or any other bipartisan discussions going on this issue, the discussions that can lead to a result between now and August are the … talks being led by Vice President Biden,” McConnell said last week. “In that meeting is the only Democrat who can sign a bill into law.”

The Biden talks paused this week because the House is on recess, but they are likely to resume next week when both the House and Senate are in session.

lisa.mascaro@latimes.com

Michael A. Memoli in the Washington bureau contributed to this report.