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Tax, healthcare disputes stall budget talks

By ANDY SULLIVAN
May 27, 2011

Paul Ryan, Chairman of the House Budget Committee, speaks with moderator Maria Bartiromo at the 2011 Fiscal Summit on Solutions for America's future in Washington, May 25, 2011. (REUTERS/Jason Reed)

Vice President Joe Biden and top lawmakers faced an impasse on taxes and healthcare on Thursday as they worked on a deal to tame the United States’ debt and increase its borrowing limit.

Republican and Democratic negotiators briefly discussed health costs, a major driver of the national debt, in a fourth round of talks that lasted a little more than an hour. The normally voluble Biden left the meeting without comment.

“We’re not doing a lot of talking for obvious reasons,” said Republican Senator Jon Kyl, a member of the group.

The group says it could agree on more than $1 trillion in deficit savings over 10 years. But aides say a fundamental stumbling block remains: Democrats will not consider cuts to health benefits until Republicans consider tax increases.

With the 2012 election season already under way, political pressures could push a deal out of reach as both sides turn their disagreements into campaign slogans.

The congressional calendar poses another hurdle as the House of Representatives and the Senate will be in session at the same time for only four of the coming 10 weeks. Kyl said the group could hold a telephone conference next week and staffers could look at specific ideas in the meantime.

The group is trying to hammer out a deal that would give lawmakers political cover to raise the $14.3 trillion debt ceiling — a limit on the federal government’s borrowing set by Congress — before an August 2 deadline.

Treasury Secretary Timothy Geithner, who participated in Thursday’s talks, has warned the United States could face a catastrophic default that would roil global markets if Congress does not raise the debt ceiling by August 2.

In a letter, 17 Republican senators argued that Treasury could avoid a default if it prioritized debt service over other spending after August 2.

“Even if the debt ceiling remains where it is, there will be more than enough money in the Treasury to make the government’s debt payments,” the letter said.

President Barack Obama’s former budget director, Peter Orszag, warned that a crisis of confidence in the bond markets will be needed to spur Congress into action.

‘PUBLIC SENTIMENT IS EVERYTHING’

Finding common ground could be difficult.

Democrats say the Republican plan to save trillions of dollars in coming decades by scaling back the Medicare and Medicaid health coverage programs for the elderly and the poor is unacceptable and see a chance to score gains in the 2012 presidential and congressional elections by campaigning against it.

“Public sentiment is everything. And the public sentiment is to preserve Medicare,” House Democratic Leader Nancy Pelosi said at a news conference.

Public unease with the Republican plan will give Democrats a chance to win back the House, said Representative Steve Israel, the lawmaker in charge of that effort.

Republicans won control of the House last fall on a promise to slash government spending but polls show voters oppose their plan to revamp the two popular programs, which account for one-quarter of government spending and are expected to eat up a growing portion of the budget in coming decades.

Republicans sought to shift the conversation to their plans to create jobs by cutting taxes and reducing regulations.

They said Democrats were more concerned with winning the 2012 election than solving the country’s long-term fiscal woes.

“The Democrats’ plan is to do nothing,” House Speaker John Boehner said. “Doing nothing means that the Medicare plan will go bankrupt and seniors’ benefits will be cut.”

Democrats point out that they passed a landmark healthcare overhaul last year. Obama last month proposed accelerating changes in that law to save $340 billion over 10 years, although that is a far cry from the $2.2 trillion that Republicans say they would save with their healthcare plan.

Copyright © 2011 Reuters