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Negotiators Look for Plan B After Brief Meeting

Brendan Smialowski/Getty Images
From left: Speaker John Boehner, President Barack Obama and Senate Majority Leader Harry Reid met with other Congressional leaders for debt talks Sunday, and they agreed to return Monday.

Leading into Sunday’s meeting, Boehner’s Saturday decision to jettison ambitions for a $4 trillion debt deal had both parties scrambling for an alternative plan to avoid defaulting on the nation’s debt.

The Ohio Republican shored up his right flank by standing firm against any hint of increased tax revenue, which would be required to strike a deal with Democrats at the $4 trillion range. But in doing so, he walked away from something that has seldom been in Republicans’ grasp: a Democratic president’s agreement to major changes to Social Security and Medicare — a political rarity and a top GOP priority.

And although the White House is pushing a larger deal with cuts to entitlements and a tax code reform, without Boehner, there won’t be one.
Republicans led by Boehner and Senate Minority Leader Mitch McConnell (Ky.) want a more modest package in the range of $2.4 trillion in cuts.

To some degree, it’s remarkable Boehner tried to negotiate a deal with significant revenue on the table at all in the face of skepticism from the other Republicans at the negotiating table: Cantor, McConnell and Senate Minority Whip Jon Kyl (Ariz.).
Both parties’ rank and file are under tremendous pressure not to make the kinds of compromises necessary to achieve a deal of any kind, and a smaller package could run up against some of the same competing pressures without the long-term payoff deficit hawks have demanded.
“Small deals are difficult, too,” Treasury Secretary Timothy Geithner said on CBS’ “Face the Nation” on Sunday. “Small deals involve a lot of pain as well. So it’s not clear that it’s easier to do less.”
Geithner added a deal would be necessary by the end of next week at the latest, and House sources have indicated that Members do not want to vote at the eleventh hour, as they did to avert a government shutdown in April.

Taxes have been the toughest part of the negotiations for months. Boehner was trying to find a way to sign on to a broad package that would include revenue but still allow him to claim it did not raise taxes. He wanted the package to only generate net tax revenue from economic growth spurred by a simpler tax system, not from tax code changes themselves, according to a Republican source. Such a move would be in keeping with Grover Norquist’s anti-tax pledge.
The White House wanted to extend the 2001 and 2003 tax cuts for the middle class beyond their expiration in 2012, but not the tax cuts for the wealthiest Americans. According to Democratic aides, that was combined with a commitment from the president to do tax reform that would lower overall rates. Democrats also were eyeing a payroll tax cut upfront, as well as relief from the alternative minimum tax.

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