Republicans pull out of debt talks, demand Obama meet directly with GOP over taxes

Congressional Republicans abruptly pulled out of debt-reduction talks with the White House on Thursday and demanded that President Obama meet directly with GOP leaders to resolve an impasse over taxes.

With the clock ticking toward an Aug. 2 deadline, senior Republicans said negotiations led by Vice President Biden had ceased making headway as congressional Democrats pressed for as much as $400 billion in new taxes on corporations and the nation’s wealthiest households.

“We’ve known from the beginning that tax hikes would be a poison pill to any debt-reduction proposal,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a speech on the Senate floor. “Those who are proposing them now either know this or they need to realize it quickly.”

In a joint statement with Sen. Jon Kyl (R-Ariz.), his representative in the talks, McConnell said: “President Obama needs to decide between his goal of higher taxes, or a bipartisan plan to address our deficit. He can’t have both.”

McConnell and House Speaker John A. Boehner (R-Ohio) said the talks could not move forward unless Obama takes taxes off the table. Democrats called the move irresponsible and showed no sign of backing down from the fight.

The campaign arm for House Democrats quickly issued a fundraising letter accusing Republicans of quitting the talks because they “aren’t willing to budge on ending tax breaks for millionaires and billionaires.”

“The only way to make sure we begin to live within our means is by coming together behind a balanced approach that finds real savings across the budget — including domestic spending, defense spending, mandatory spending, and loopholes in the tax code,” Biden said in a statement. “We all need to make sacrifices, and that includes the most fortunate among us.”

Progress made

The breakdown of the talks comes after seven weeks of negotiations that all sides say made real progress toward a plan to restrain the swollen national debt. Biden and six lawmakers from both parties had tentatively agreed to more than $1 trillion in savings and had begun to tackle the toughest issues: Democratic demands for higher taxes and spending cuts at the Pentagon, and Republican demands for sharp cuts to health and retirement programs.

Those issues were never likely to be resolved without head-to-head talks involving Obama, Boehner and other congressional leaders. Thursday’s developments may merely serve to hasten the moment of truth.

“The next phase is in the hands of [party] leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support,” Biden said. “For now, the talks are in abeyance as we await that guidance.”

Asked what comes next, Boehner said the ball is in the president’s court.

“I would expect to hear from him,” Boehner told reporters, adding that his emissary to the talks, House Majority Leader Eric Cantor (R-Va.), “has made it clear that these conversations could continue if they take the tax hikes out of the conversation.”

Private channels have already been opened between the White House and Republicans on Capitol Hill. Wednesday evening, Obama met with Boehner at the White House, inviting him to follow up “on conversations they had on the golf course on Saturday,” according to White House press secretary Jay Carney. Neither Carney nor Boehner’s office would comment further on the meeting.

House Democratic leaders also met with Obama at the White House, urging him during a meeting Thursday morning to stand firm on taxes. They are proposing to eliminate a variety of corporate tax breaks and to cap the value of deductions taken by households earning more than $500,000 a year at 10 percent of adjusted gross income.

Democrats fire back

“It’s unfortunate that House Republicans walked away from the table in order to protect special-interest tax breaks for big oil companies and corporate jets and other special interests with powerful Washington lobbyists,” said Rep. Chris Van Hollen (D-Md.), who represents House Democrats in the talks.

Senate Majority Leader Harry M. Reid (D-Nev.) accused Republicans of “playing a game of chicken” that threatens to undermine the sputtering economic recovery.

“If they don’t work to cooperate to get something done, the harm for this country and the world will be very significant,” Reid said. “And that’s on their conscience.”

Since May 5, negotiators in the Biden talks have been rushing to hammer out a plan to slice more than $2 trillion from the federal budget over the next decade. Lawmakers in both parties are demanding such a blueprint as a condition for voting to raise the legal limit on government borrowing, currently set at $14.3 trillion.

The national debt hit that limit in May. Treasury Department officials can juggle the books through early August, when the government could begin defaulting on its obligations. A default could vastly increase government borrowing costs and spark severe disruptions in global financial markets.

The decision to pull the plug on the Biden talks was made by Cantor, who announced the move in an early-morning interview with the Wall Street Journal. Before the story hit the paper’s Web site, aides said Cantor called Boehner, Kyl and other GOP leaders — as well as Biden — to let them know he would not be attending the bargaining session set for Thursday afternoon.

In a statement, Cantor said the talks had “identified trillions in spending cuts” and “established a blueprint that could institute the fiscal reforms needed to start getting our fiscal house in order.” He praised Biden, saying the vice president “deserves a great deal of credit for his leadership in bringing us this far.”

“That said, 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,” Cantor said. “Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue.”

Staff writers Felicia Sonmez, Paul Kane and Rosalind S. Helderman contributed to this report.

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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