- The Washington Times - Thursday, June 23, 2011

Republican negotiators walked away from bipartisan deficit reduction talks between Congress and the White House on Thursday, saying the bargaining sessions had reached an impasse over tax increases Democrats are insisting must be part of any eventual deal.

House Majority Leader Eric Cantor of Virginia and Sen. Jon Kyl of Arizona, two top GOP members on a six-member congressional delegation that had been meeting regularly with Vice President Joseph R. Biden, said President Obama must now get personally involved if the conversations are going to go any further.

“Each side came into these talks with certain orders, and as it stands the Democrats continue to insist that any deal must include tax increases,” Mr. Cantor said in a prepared statement.

Soon after Mr. Cantor’s exit, Mr. Kyl quickly followed. A senior Republican aide said the senator felt that without Mr. Cantor — the sole House Republican participant — the group essentially was dead.

The move exacerbates the tension and raises the political stakes for both sides to cut a deal on spending ahead of what the administration is an early August deadline to raise the federal borrowing limit and avoid what could be a catastrophic default on the government’s debts.

White House press secretary Jay Carney said the president is prepared to take a more active role in working with Capitol Hill to reach a deal, and played down the notion that talks had ground to a halt.

“It is always been the case that these talks would proceed to a point where the remaining areas of disagreement would be addressed by [congressional] leaders and the president,” he said.

Mr. Biden said it was time for congressional party leaders to push the talks forward.

“The goal of these talks was to report our findings back to our respective leaders,” the vice president said in statement released Thursday evening. “The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support.”

Despite the at-times confrontational rhetoric, there were signs the two sides were keeping the lines of communication open.

Mr. Carney told reporters that House Speaker John A. Boehner, Ohio Republican, had met unannounced with Mr. Obama at the White House on Wednesday evening. The meeting was at the president’s initiative, and the first known encounter between the two men since their widely publicized round of golf last weekend.

There were no details on what the two men discussed.

Mr. Obama had demanded the high-level negotiations in April, and charged the panel with coming up with budget reforms that Congress will accept in exchange for raising the government’s debt ceiling. Republican leaders, pressed by a large contingent of new tea party-allied members, have demanded major spending cuts and reforms as their price for agreeing to another debt ceiling hike.

The talks are being conducted behind closed doors and even party leaders said they are not privy to all the details being discussed, though the outlines are clear: Republicans say the federal red ink should be reduced through spending cuts, while Democrats argue tax increases should also be on the table.

After 11 meetings, Republicans said the talks have gone as far as they can without Mr. Obama becoming personally involved.

Mr. Cantor said the group has made progress identifying “trillions in spending cuts” and “established a blueprint that could institute the fiscal reforms needed to start getting our fiscal house in order.” He also praised Mr. Biden’s “leadership in bringing us this far.”

But he and Mr. Boehner said tax hikes that Democrats are proposing are a non-starter because they can never pass the House, which the GOP controls.

“Those talks could continue, if they’re willing to take the tax hikes off the table,” Mr. Boehner told reporters.

Mr. Kyl agreed any deficit-reduction proposal featuring new spending and higher taxes wouldn’t be supported by his GOP colleagues.

“President Obama needs to decide between his goal of higher taxes or a bipartisan plan to address our deficit. He can’t have both,” said Mr. Kyl in a statement issued jointly with Senate Minority Leader Mitch McConnell, Kentucky Republican. “We need to hear from him.”

Democrats accused Republicans of abandoning the talks at a critical moment.

“Although there is no doubt that there were some very difficult issues that needed to be decided,” said Rep. Chris Van Hollen, a Maryland Democrat and member of the Biden group. “The speaker of the House said it was time for an adult moment. Adult moments mean it’s time for making tough decisions.”

The Biden panel has been trying to hammer out a deal to raise the nation’s $14.3 trillion debt ceiling — the legal limit that the federal government can borrow money to pay for its operations and debt obligations.

Congressional leaders of both parties, along with the White House, economists and Wall Street agree the debt ceiling must be raised. Exceeding the limit could lead to a U.S. default on its loans, a scenario that would damage the nation’s credit rating and could trigger another financial crisis.

Republicans, in addition to not wanting taxes raised, say any deal must include spending cuts that exceed the amount the ceiling is raised — at least $2 trillion.

Democrats argued they have been willing to compromise on many GOP spending cut demands, and accused Republicans of “playing chicken with the economy.”

“This is not the time to be giving up on our economy,” said Senate Majority Leader Harry Reid, Nevada Democrat. “It appears [Republicans] have given up. … Democrats are not going to give up on the American people.”

House Minority Leader Nancy Pelosi, California Democrat, bristled at the Republicans’ portrayal of their tax position, suggesting that only the corporate world — not average Americans — would pay more.

“Yes, we do want to remove tax subsidies for big oil. We want to remove tax breaks for corporations that send jobs overseas. The list goes on,” Ms. Pelosi said. “I don’t know if that’s a reason to walk away from the table when we’re trying to find a balanced approach.”

But many in Washington and on Wall Street worry that if the stalemate continues deep into July, the financial markets — fearing a deal won’t be made — would react negatively.

Mr. Cantor didn’t rule out returning to the group later if the taxes issue was settled.

But Sen. Charles E. Schumer, New York Democrat, accused Mr. Cantor of buckling to pressure from the far right of his party.

“I think that Republicans are quietly coming to the realization that it will take Democratic votes to pass any debt-ceiling agreement,” Mr. Schumer said. “Leader Cantor clearly got spooked by how this final deal has to come together.”

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