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Obama, lawmakers see urgency in budget deal

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Associated Press
July 8, 2011
— President Barack Obama and Congress' top Republican signaled a new flexibility in budget talks aimed at averting the first-ever U.S. debt default. But a deal remained tenuous, with each side pushing ideas considered untenable by the other.

Emerging from a one-and-half hour meeting with the eight top congressional leaders, Obama said the lawmakers agreed to a rare weekend meeting on Sunday, illustrating the accelerated pace of talks, but added a note of caution: "The parties are still far apart on a wide range of issues."


The negotiating stakes are high.


Without a deal on deficit reduction, Republican leaders say they don't have the votes to increase the nation's borrowing authority, raising the danger of the first-ever U.S. debt default. The administration says the current $14.3 trillion debt ceiling will be tapped out by Aug. 2.


Such a default would likely touch off a major global financial crisis and plunge the country into another recession, analysts say.


Raising the U.S. debt ceiling is usually little more than a formality but Republicans who control the House of Representatives say they won't go along without major spending cuts.


The White House also raised the ante Thursday saying the president is aiming for deficit reduction closer to $4 trillion over 10 years an ambitious number that would nearly double the roughly $2 trillion that had been at the center of negotiations.


The major clash centers on how to reduce spending on the major programs that pay retirement and medical benefits to the elderly and poor, all prized by Democrats, and tax changes that would close loopholes and end certain corporate breaks. Republicans insist that any tax changes be used to lower rates on corporations and individuals.


The negotiations are politically difficult for both parties.


Raising the debt ceiling is unpopular with voters, especially with Republicans who fear they could be challenged by fellow party members in primaries across the country.


The social programs that provide aid to the elderly and poor are popular with liberals and have been long protected by Democrats in Congress.


Signaling a potential obstacle, House Democratic leader Nancy Pelosi said she will oppose including cuts to benefits in any package aimed at reducing huge federal deficits.


"We are not going to balance the budget on the backs of America's seniors," Pelosi said.


One White House proposal under discussion would find savings by changing the formula for determining annual cost of living increases for pension beneficiaries. Officials familiar with Thursday's discussions said that specific proposal did not come up in the meeting with congressional leaders.


The White House, however, was forced to downplay it after news organizations reported that the government retirement program was part of the talks.


Underscoring the political stakes, Pew Research Center reported Thursday that in a recent poll they found that six out of 10 of those surveyed believe it is more important to maintain the federal Social Security pension program and Medicare health care benefits than to reduce the budget deficit.


Republicans have showed some new flexibility on closing tax loopholes and ending corporate tax breaks that Obama has demanded. But they say any revenue generated by those steps would have to be used to lower tax rates and simplify the tax system. Such a step would require a major overhaul of the tax code and could not be accomplished in the few weeks left before the Aug. 2 debt ceiling deadline.


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Associated Press writers Jim Kuhnhenn, Ben Feller, Andrew Taylor, Alan Fram and Laurie Kellman contributed to this article.



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