- Associated Press - Friday, June 24, 2011

WASHINGTON (AP) — Stepping directly into stalled debt talks, President Barack Obama is inviting the two leaders of the U.S. Senate to separate meetings Monday, shifting the negotiations to the highest levels.

The White House meetings, announced Friday by press secretary Jay Carney, would seek to pick up where negotiations headed by Vice President Joe Biden left off. Republican negotiators abandoned those talks Thursday over Democrats’ insistence on including tax increases in any deficit-reduction plan.

Mitch McConnell, the Senate’s Republican leader, has been demanding that Obama become personally involved in the budget discussions. Obama will meet with him and Senate Majority Leader Harry Reid.

Congressional Republicans want to reach a deal on about $2 trillion in spending cuts over 10 years before agreeing to raise the nation’s borrowing limit, currently capped at $14.3 trillion. The Treasury Department has said it has until Aug. 2 before its ability to pay U.S. debt runs out.

The issues are potentially sensitive ahead of next year’s congressional and presidential elections. Both parties are under pressure from their bases. Republicans want to cut spending without raising taxes but are also reluctant to curb the military budget. Democrats are trying to defend health care benefits and other social programs and are also looking for new sources of revenue, like getting rid of a tax break for ethanol.

Obama has repeatedly called for a “balanced framework” for long-term deficit reduction, saying cuts in spending are necessary but that additional tax revenue should also be part of the equation. Democrats insist that additional revenues be found by closing tax breaks, alongside the trillions of dollars in spending cuts.

The leader of the House, Speaker John Boehner, on Friday ruled out any tax increase as part of a final budget deal.

In a statement following the White House invitation, McConnell said Obama needs to decide between tax hikes or a bipartisan agreement. “He can’t have both,” McConnell said.

“Sadly, the Democrats’ response has been a mystifying call for more stimulus spending and huge tax hikes on American job creators. That’s not serious, and it is my hope that the president will take those off the table on Monday so that we can have a serious discussion about our country’s economic future,” McConnell said.

The decision by House Majority Leader Eric Cantor and Sen. Jon Kyl, R-Ariz both Republicans, to quit deficit-reduction talks as a critical deadline approaches set the stage for Obama to step in.

It had long been assumed that the Biden group would clear the way for more decisive talks personally involving Obama and Boehner. As a result, Cantor’s move was interpreted as trying to jump-start the talks rather than blow them up — a view shared by Cantor himself.

“The purpose here is to alter the dynamic,” Cantor said.

In fact, Cantor’s withdrawal came after Boehner had already made a trek to the White House — in a secret meeting Wednesday night that followed up on a golf outing with Obama over the weekend. For his part, Cantor did not inform Boehner of his decision to leave the talks until Thursday, shortly before the news broke.

The White House sought to put a positive spin on developments.

“As all of us at the table said at the outset, the goal of these talks was to report our findings back to our respective leaders,” Biden said in a statement. “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.”

The Obama administration says passage of the legislation by Aug. 2 is necessary to meet the government’s obligations to holders of U.S. Treasurys. The alternative is a market-shaking, first-ever default on U.S. obligations.

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