‘Big deal’ eludes Obama in latest debt talks

President Obama continued to push for a $4-trillion deal to rein in government deficits Sunday, but a White House meeting with congressional leaders failed to break the deadlock over spending and taxes that has stymied discussions for more than a month.

Negotiators agreed to meet again Monday, but otherwise their 75-minute session merely restated their positions. Republicans maintained that a deficit-cutting deal could not include any additional tax revenue, congressional officials said. Democrats argued that cuts in spending alone would not achieve a substantial reduction in federal deficits without also including new revenue.

Using the full scope of the bully pulpit, Obama scheduled a news conference for 8 a.m. PDT on Monday to update the public on the negotiations.

Obama was consistent throughout Sunday’s meeting that he wanted to see “a big deal,” declaring that “if we don’t do it now, when will we do it?” according to a Democratic official familiar with the meeting who was not authorized to speak publicly.

On the Republican side, Rep. Eric Cantor (R-Va.) did most of the talking.

The president tried to win Republican support by making the argument that lawmakers don’t need to vote for a tax increase, the official said. By simply allowing the George W. Bush-era tax cuts for the wealthiest Americans to expire as scheduled at the end of 2012, Republicans could avoid casting a vote that deviated from the party’s anti-tax doctrine, Obama said.

In exchange, Republicans would get “substantial tax reform,” the Democratic official said.

At stake is a compromise that would clear the way for Congress to raise the nation’s $14.3-trillion debt ceiling. Treasury Department officials say the ceiling must be increased by Aug. 2 or the government will begin to run out of money. Congressional leaders have warned that to meet the deadline and prepare the necessary legislation, a deal must be in place by July 22.

Although negotiators agreed on little else, both sides acknowledged that the U.S. could not go into default, the Democratic official said.

Treasury Secretary Timothy F. Geithner painted a bleak scenario of what might unfold should the U.S. fail to raise the debt ceiling. America’s credit rating could be downgraded, he told NBC’s “Meet the Press,” “and if that happens you’re going to see catastrophic damage across the American economy and across the global economy.”

At a photo session in the Cabinet Room before Sunday’s meeting, a reporter asked Obama whether he could reach a deal with congressional leaders by July 22.

“We need to,” said the president, who was flanked by Senate Majority Leader Harry Reid (D-Nev.) and House Speaker John A. Boehner (R-Ohio).

Obama had just returned from a quick getaway to Camp David. With temperatures in Washington pushing 100 degrees, dress was casual — open collars and blazers.

Boehner angered White House officials when he called the president Saturday and told him that a sweeping deficit reduction agreement was not possible because of the administration’s insistence that new tax revenue be an ingredient of the deal. Conservatives equate additional revenue with a tax increase.

Rather than push for a $4-trillion deal in the time available, Boehner said, both sides should regroup and focus on a less ambitious package of spending cuts of about $2.5 trillion — large enough to win GOP support to raise the debt ceiling. That approach would build on negotiations conducted in recent months by Vice PresidentJoe Biden.

After Sunday’s meeting, an aide to Boehner issued a statement: “The speaker restated the fundamental principles that must be met for any increase in the debt limit: spending cuts and reforms that are greater than the amount of the increase, restraints on future spending, and no tax hikes.”

Reid expressed frustration with Republicans, accusing them of always walking away when debt negotiations get tough, from the “no” votes some of them cast on the president’s fiscal commission’s report last year to their withdrawal from the Biden talks, a congressional aide said.

Although both sides remain far apart, the tone of the talks was cordial.

“Their argument was a mixture of unwillingness to do anything that would raise revenue to a statement that we don’t have enough time at this point to negotiate a big deal,” the Democratic official said.

But a smaller deal also may be a challenge.

Such a package would likely be made up mostly of spending cuts, on par with the $1.5 trillion to $1.8 trillion in deficit reduction identified in the preliminary talks led by Biden.

Cuts on that scale would touch nearly every federal agency and draw resistance from Democrats who are especially loath to target the Medicaid program for low-income and disabled Americans. At the same time, Republicans, who make up the majority in the House, would probably prefer a larger deal driven by even deeper cuts.

Budget experts said the Biden group identified much of the low-hanging fruit — agriculture subsidies, federal pensions and some new fees — and predicted that achieving a final package would remain difficult, especially without new revenue sources.

Knowing that Boehner probably would not have enough Republican votes to pass such a package in the House, the Obama administration has sought to attract Democrats by proposing to continue a payroll tax break for employees that is set to expire at the end of this year. Its $120-billion cost would be covered by closing loopholes on corporate jet owners, oil and gas companies and other industries.

peter.nicholas@latimes.com

lisa.mascaro@latimes.com