Seeking debt accord, GOP backs off Medicare revamp

WASHINGTON — Congressional leaders and the Obama administration aired proposals designed to steer around a risky confrontation over the federal budget and lead to a political compromise in coming weeks.

The moves came Thursday as talks opened between Vice President Joe Biden and congressional leaders over how to shrink the deficit. But those talks were quickly overshadowed by statements from Republican leaders publicly conceding a political reality — that that their far-reaching plan to eventually privatize Medicare is not moving forward any time soon.

“I have not taken Medicare off the table, but the president has,” Rep. Eric Cantor of Virginia, the majority leader, who represented House Republicans at the meeting with Biden, told reporters afterward. “The reality is this president has excoriated our budget plan and the Medicare proposal.”

Instead of such an ambitious plan, congressional Republicans are pressing for a series of steep but less dramatic spending cuts as their top deficit-reduction strategy. Both sides also talked of making a commitment to long-term budget reductions that would be enforced by so-called “trigger” mechanisms that could automatically impose deficit reductions if Congress fails to act in years to come.

Such mechanisms would postpone many of the most difficult budget decisions until after the next election.

Before Congress went on its mid-April recess, the two sides had appeared to be heading toward a showdown over the budget and the federal government’s borrowing limit. Thursday’s comments indicated a shift. They came against a political background that has changed substantially in the intervening weeks – a president strengthened by rising poll numbers and Republicans who were pummeled by angry voters at town hall meetings and targeted in Democratic ads during the recess that accused them of seeking to destroy Medicare.

Despite signs of a more accommodating mood, both sides expect weeks of hard bargaining and political theatrics between now and an eventual vote to raise the federal government’s borrowing limit — something Congress will have to face before the end of July.

Deep divisions remain over tax hikes and spending cuts, and both parties have internal divisions over how much to compromise. But the two sides agreed to meet again early next week in a sign of the seriousness of the effort to rein in deficit spending as part of an agreement to lift the legal debt limit beyond $14.3 trillion.

“We had a good, productive first meeting today,” said Vice President Joe Biden, who hosted the session.

The latest proposals were not formally presented at Thursday’s session, which officials described as a meeting to review starting points for discussion. House Speaker John Boehner (R-Ohio) insisted the Republican budget plan passed last month, with its deep domestic spending cuts and Medicare changes, remains the party’s opening position.

But it was clear that GOP leaders were acceding to the reality that such a far-reaching proposal could not be passed in the next few months. Rep. Dave Camp (R-Mich.), chairman of the Ways and Means Committee, which plays an instrumental role in advancing legislation, said he had no plans to take up the Medicare proposal.

“I’m not really interested in just laying down more markers,” said Camp at a briefing hosted by the policy journal Health Affairs. “I’d rather have the committee working with the president and with the Senate, focused on savings and reforms that can be signed into law.”

White House officials Thursday commended GOP efforts to advance proposals that both sides could discuss.

“The necessity to set aside maximalist positions is paramount if you’re trying to reach common ground and find a consensus around some achievable goal,” said President Obama’s press secretary Jay Carney. “So we welcome any efforts, indications, that parties to these negotiations are searching for common ground, and look forward to these talks getting underway and to having them produce a result.”

Those familiar with the talks cautioned that Thursday’s formal meeting was the first of many negotiations as administration officials ask Congress to raise the nation’s debt limit by Aug. 2. The government formally hits its debt ceiling of about $14.3 trillion this month, but Treasury Department officials said they can maneuver around the limit until August.

The national debt ceiling has been routinely raised, and nearly doubled, to almost $11 trillion, under former President George W. Bush. But the votes are unpopular.

This year, House Republicans are demanding budget reforms and spending cuts in exchange for their vote, a stance that has drawn the White House into the deficit-cutting exercise.

Without an increase in the debt limit, economists warn of a financial crisis would throw the economy into turmoil and cause interest rates to spike.

Talks are likely to be tense and fragile, as were negotiations over the 2011 spending plan, which ended in a midnight vote that narrowly averted a government shutdown.

Even with spending cuts, many conservative Republican lawmakers oppose an increase in the debt ceiling. Yet, leaders on both sides said they understand the gravity of the issue, and want to avoid agitating jumpy financial markets as negotiations continue.

But differences remain. While both sides want to reduce deficits, Democrats want increases in tax revenue as well as spending cuts.

GOP leaders are unwilling to raise taxes — either on those families earning more than $250,000, as Obama has proposed, or by closing individual and corporate tax loopholes.

“When it comes to increasing the debt limit and the need for reductions in spending, nothing is off the table — except raising taxes,” Boehner said Thursday.

The two-part strategy could appeal to both sides by giving Republicans the immediate spending cuts they seek while pushing to future years more comprehensive debt reduction strategies.

Cantor told those around the summit table that immediate spending cuts must be part of any agreement.

One area of compromise could be in the GOP proposal to give states more control over Medicaid, the health program for low-income families, seniors and the disabled.

Cantor at the summit outlined $715 billion in non-health cuts as outlined in Ryan’s budget from domestic programs that receive mandatory infusions of cash – from transportation and energy accounts to agricultural subsidies.

But Democrats likely will insist that some of the deficit reduction measures come from about $1 trillion annual revenue lost to tax breaks for high earners, oil companies and other industries.

“I don’t see how you can possibly talk about serious deficit reduction … without considering a change in the revenue scheme,” said Rep. Nancy Pelosi (D-Calif.), the minority leader,

To meet spending goals in future years, the early proposals would establish “triggers” if budget targets are not met.

Obama proposed such a mechanism last month.

But many Republicans have soured on debt triggers, seeing such an approach as a backdoor method for future tax increases.

Lisa.Mascaro@latimes.com

cparsons@tribune.com