Major deficit reduction deal still possible, White House insists

President Obama will continue to press for a sweeping deficit reduction package in his negotiations with congressional leaders, despite assertions from Republican leaders that a compromise on such a grand scale is impossible at this stage, top White House aides said Sunday.

Prospects for reducing deficits by $4 trillion over the next decade dimmed this weekend when House Speaker John Boehner (R-Ohio) announced Saturday night that he was abandoning the effort because of White House insistence that increased tax revenue be part of the deal. Boehner said he would instead push for a more modest deal — in the range of a $2-trillion reduction — that would be a prelude to raising the nation’s debt ceiling by an Aug. 2 deadline, a step the Obama administration says is necessary to avoid a government default with catastrophic consequences.

Leaders of the two parties are scheduled to continue negotiations at 6 p.m. EDT on Sunday in a meeting at the White House.

In appearances on morning television talk shows, top administration officials said that Obama won’t give up on a major deal that would reduce deficits and shore up the nation’s major entitlement programs.

“This president is committed to bringing economic soundness to this country,” said White House Chief of Staff William Daley, appearing on ABC’s “This Week.” “And that takes a big deal.”

Treasury Secretary Timothy F. Geithner said Obama wanted to “do the right thing for the country.”

“You have to do the biggest, most substantial deal possible,” he said on NBC’s “Meet the Press.” “We’re going to keep at it.”

Geithner urged Republican leaders not to pull out of the discussions, saying, “We know this is very hard to do. But they shouldn’t walk away from trying to do something good for the country.”

On the other side, Republicans showed little appetite for the far-reaching proposal Obama envisions. Senate minority leader Mitch McConnell (R-Ky.) said that the White House and congressional Democrats wanted “really big tax increases as a condition of” cutting spending.

Republicans favor spending cuts only, while Obama has pushed for a more balanced effort that cuts spending but brings additional deficit reductions through more revenue by closing tax loopholes and ending some tax breaks for the wealthiest Americans. The administration’s position is that $4 trillion in deficit reductions is not possible through spending cuts alone without massive cuts in entitlement programs such as Social Security and Medicare, proposals that the White House and many Democrats reject.

Asked on” Fox News Sunday” if a large-scale deal was off the table, McConnell responded, “Well, I think it is because everything they told me and the speaker is that to get a big package would require a big tax increases in the middle of economic situation. That’s extraordinarily difficult with 9.2% unemployment. We think it’s a terrible idea. It’s a job killer.”

Should support for a large deal collapse, the two sides could still coalesce behind a less ambitious package that would cut the deficit and have enough Republican support to raise the debt ceiling. In his announcement, Boehner said he would prefer that approach.

No matter what happens, Geithner said, leaders on both sides must raise the debt ceiling by Aug. 2. If the U.S. misses that deadline, America’s credit rating could be downgraded, he said, “and if that happens you’re going to see catastrophic damage across the American economy and across the global economy.”

Even Republican opponents of the White House seem to have absorbed that message.

“Nobody is talking about not raising the debt ceiling. I haven’t heard that discussed by anybody,” McConnell said.

The deficit reduction talks are a tricky straddle for the White House. As White House officials court Republican support for a major compromise, they are also trying to rally the public by depicting Republicans as protectors of the richest Americans.

Daley said Sunday that Republicans were “concentrating on trying to bring continued tax relief to the wealthy.”

peter.nicholas@latimes.com