Debt-Limit Divide Deepens as Talks Approach the Brink

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House Majority Leader and House Budget Committee Chair Rep. Eric Cantor answers questions from reporters after speaking at a U.S. Chamber of Commerce event entitled Controlling Costs: The Price of Good Health July 12, 2011 in Washington, DC.

As the U.S. hurtles toward a potential debt-limit default that would shake the fragile economy, the chasm between the two parties widened on Tuesday, as Republican opposition to tax increases calcified and Democrats bristled at the inclusion of cuts to entitlement-program beneficiaries without “shared sacrifice” from the wealthy.

After meeting for more than 90 minutes in the basement of the Capitol, House Republicans emerged preaching party unity and vowing not to cave to mounting political pressure for a compromise. GOP lawmakers have three demands: a package that includes enforceable caps and controls on spending, with cuts commensurate to the increase in the U.S.’s borrowing authority and no tax hikes. Republicans also issued a withering critique of President Obama, suggesting that the prospects for a deal have darkened. “The President talks a good game, but when it comes to actually putting these issues on the table and making decisions, he can’t quite pull the trigger,” House Speaker John Boehner said.

Mitch McConnell, the Senate Minority Leader, went farther in his criticism of Obama. “The President has presented us with three choices: smoke and mirrors, tax hikes or default. Republicans choose none of the above,” McConnell said. On Tuesday afternoon McConnell unveiled his alternative: a patchwork plan that lets Obama request three short-term debt-limit increases between now and the 2012 election, which would together usher in spending cuts of some $2.5 trillion without prior Congressional approval. Though designed to lift the burden on Republicans leery of backing a debt-limit increase, it’s unclear the idea would find any traction in the House, where Republicans have eschewed a piecemeal approach. Even if it did, Obama has said he won’t sign it. It’s a gambit to assign blame to Obama, whom Republicans believe would endure the brunt of the blowback if a congressional impasse produces a fiscal calamity. “This debt-limit increase is his problem,” Boehner said, “and I think it’s time for him to lead by putting his plan on the table.”

(MORE: Eric Cantor, the GOP’s Hard-Line Lieutenant, Sways Debt Talks)

It is not just Obama’s problem. Republicans in Congress–including all four leaders with a seat at the White House summits–have voted to increase the debt limit on a slew of occasions over the years; their insistence that Obama alone is to blame for the ballooning debt and deficit is “factually untrue,” as House Minority Whip Steny Hoyer told reporters at a briefing Tuesday morning. To be sure, Democrats — including then-Senator Obama — have played politics with the debt limit as well, but not to the point of threatening U.S. default. House Minority Whip Steny Hoyer told reporters Tuesday that Republicans leaders agree that it is “essential” that the U.S. meet its credit obligations. But having decided to use the issue in a high-risk game of chicken, they may not be able to persuade their rank-and-file to swerve.

The bomb-throwing band of House freshmen, who felt burned by a spring deal to avert a government shutdown that yielded less spending cuts than promised, is insisting on immediately enforceable spending reductions rather than the “fairy-dust spending cuts” that Obama has offered, says freshman Allen West of Florida. But even more moderate members within the conference say they won’t budge on new revenues, which Democrats consider a crucial component to any agreement.  “There’s definitely unity within the conference to saying we’re not going to raise taxes,” says freshman Republican Adam Kinzinger of Illinois. A passel of conservative Republicans are also trying to tie support for a deal to passage of a balanced-budget amendment. The amendment will get a vote next week in the House, where it requires a two-thirds majority, but has little chance of passing even one chamber.

(MORE: Joe Klein: Accept McConnell’s Debt Ceiling Deal)

This tangle of contingencies is why legislators on both sides of the aisle sound increasingly skeptical. “Can they get the votes? They perhaps cannot,” Hoyer said of Republican leaders. Republican Senator Lindsey Graham was pessimistic about the prospects for an accord as well. “If I were a betting man, I’d bet no,” he told ABC News.

On a sweltering afternoon, congressional negotiations headed back to the White House for the latest round of talks. Obama and Congressional Democrats are still pushing for a sweeping deal, while Majority Leader Eric Cantor, who along with Senate Minority Whip Jon Kyl has done the bulk of the bargaining for the GOP in recent days, is selling his members on a version of the Biden framework he walked away from just weeks ago, which he argues could stretch to $2 trillion in spending cuts, with more than $1 trillion from discretionary spending, up to $700 billion from mandatory health spending and approximately $300 billion in interest savings. (Ezra Klein has a copy of the PowerPoint slides.) The White House and Democrats in Congress say the size of the agreed-upon savings are considerably less.

But while Cantor is asking Democrats to concede cuts to their most prized programs, Republicans aren’t putting any of their own sacred cows on the table. Cantor argues that increasing the debt ceiling would itself amount to a compromise. “For Mr. Cantor to say that it was a major concession by the Republicans to sit down at the table to discuss getting to an agreement is an extraordinary comment to be made in a democracy,” Hoyer argued.

The path to an agreement is murky. In some respects, it’s easier to imagine both sides swallowing a grand bargain than a medium-sized pact, since Republicans could credibly claim that the tax increases Democrats insist on would be offset by a future tax-code overhaul. But while the GOP say they’re eager to end some corporate tax breaks, they are skittish about swapping tax increases on the wealthy now for spending cuts and comprehensive tax reform in the future. In part, says a House GOP aide, that’s because Republicans are worried future spending reductions won’t be enforced as promised. Nor do they trust Congress to use the revenue accrued to pay down the deficit.

(MORE: In Debt Press Conference, Obama Enjoys the Upper Hand)

If Republicans won’t bend, will Democrats? There’s less unanimity on their side, with fissures between the centrists willing to put all options on the table and the liberals dug in against cuts to entitlement programs. “We must protect Medicare and Social Secuity. We will not support cuts,” House Minority Leader Nancy Pelosi said Tuesday, flanked by 15 women in the Democratic caucus at a press conference that highlighted the disproportionate impact cuts would exert on women and minorities. Preserving programs like Medicare and Social Security is “the core of what we are all about,” said Democrat Kathy Hochul, who sprung an upset in a recent special election in a conservative Buffalo-area district by bludgeoning her Republican opponent for backing cuts to Medicare.

With the Aug. 2 deadline looming, which side will ultimately break the deadlock? “We’re not at ‘ultimately.’ I don’t want to speculate about ‘ultimately,'” said Hoyer. But we are already nearing the end game. At the end of last week, when the fabled “big deal” briefly seemed to be within his grasp, Boehner said Congress had a fleeting window in which to strike a deal. That window has closed, and the talks may be headed toward the brink.

Alex Altman is a Washington correspondent for TIME. Find him on Twitter at @aaltman82. You can also continue the discussion on TIME‘s Facebook page and on Twitter at @TIME.

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