Top Republican quits debt talks

White House-led deficit reduction talks unraveled Thursday as a top Republican pulled out, putting pressure on President Obama to help resolve an impasse over the key issue holding up a deal: whether to allow new revenue by ending certain tax breaks.

The abrupt departure by Rep. Eric Cantor (R-Va.), the majority leader and negotiator for House Republicans, shows just how toxic new taxes are to the GOP — even if the revenue is generated by closing loopholes on corporations or wealthy individuals, as Democrats propose.

The White House declined to say whether Obama would enter the fray. Negotiators have been meeting behind closed doors in talks led by Vice President Joe Biden for seven weeks as all sides seek a deal that could pave the way for a vote in Congress to increase the nation’s $14.3-trillion debt limit.

Republicans have refused to raise that ceiling without an agreement to extract an equal amount in budget reductions, though their spending plan would also require increasing the limit. As much as $2.4 trillion in new debt would be needed to cover federal obligations through 2012.

Administration officials and financial experts say a failure to raise the debt limit by Aug. 2 would result in a disastrous federal default, which would lead to downgraded U.S. debt and higher borrowing costs.

With the deadline just over a month away, Obama invited House Speaker John A. Boehner to meet at the White House late Wednesday afternoon, an indication that talks were about to get underway between the two principals who had been expected to negotiate the final deal. Cantor did not know Boehner had been at the White House.

White House Press Secretary Jay Carney said Thursday that much “progress had been made” in the Biden-led talks, even as the White House insisted that reclaiming a portion of the $1 trillion the government spends annually on federal tax breaks be part of any deal.

“The president supports a balanced approach,” Carney said. “Everything’s got to be on the table.”

The issue is whether deficits can be cut by more than $2 trillion on the spending side alone, as Republicans insist. Democrats have pushed for cuts and revenue increases, proposing a “menu” of tax breaks for corporations and wealthy individuals that could be eliminated or reduced.

GOP leaders rallied behind Cantor’s decision to skip Thursday’s talks, which were subsequently cancelled, as he cited the impasse on the tax issue. No new meetings are scheduled.

“The American people don’t want us to raise taxes,” Boehner said. “It’s not just a bad idea; it doesn’t have the votes.”

The conservative House majority has put enormous pressure on GOP leaders to adhere to “tea party”-inspired principles of smaller government, and conservative groups warned that any new revenue — even if generated by closing loopholes — would be portrayed as a tax hike. It would be politically difficult for Cantor, long aligned with the conservative flank, to agree to a deal that would be perceived as including tax increases.

Democrats have targeted federal tax subsidies for oil and gas companies, owners of corporate jets and companies with operations overseas. They also propose reducing tax deductions claimed by wealthy individuals, citing suggestions from the president’s bipartisan fiscal commission.

“Those are things we should deal with here and now,” said Rep. Chris Van Hollen (D-Md.), a negotiator for House Democrats. He said there was no justification for allowing such breaks “if you’re serious about reducing the deficit.”

Republicans called on Obama to get more involved.

“That’s the president’s job,” said Sen. Mitch McConnell of Kentucky, the Senate Republican leader. “He needs to lead.”

Biden and the congressional negotiators have identified more than $1 trillion in potential savings on cuts to agricultural subsidies and federal employee pensions, and new revenue through the auction of the communication spectrum. They also have identified domestic spending cuts, including possible reductions to the Medicaid program for the low-income, the disabled and seniors.

lisa.mascaro@latimes.com