The Wall Street Journal
By: Janet Hook & Corey Boles
June 24, 2011
GOP Team Withdraws, Leaving Obama and Boehner to Negotiate a Final Deal
The drive for a major deficit-reduction deal entered a new phase Thursday when Republican negotiators pulled out of bipartisan talks, leaving it to President Barack Obama and House Speaker John Boehner to resolve the toughest issues.
House Majority Leader Eric Cantor (R., Va.) said he was backing out of the talks for now because the group had reached an impasse over the question of whether tax increases should be included in the deal.
The only other Republican in the group, Sen. Jon Kyl (R., Ariz.), soon followed suit, agreeing that only the highest levels of leadership could break the logjam between Democrats' demand that the budget deal include tax increases and Republicans' adamant opposition to that demand.
The talks were aimed at striking a budget deal in hopes of easing the way for Congress to raise the government's $14.29 trillion debt limit. Treasury Department officials say that without additional borrowing authority, the government will run out of cash to pay its bills by Aug. 2. They warn that defaulting on any U.S. obligations could trigger another financial crisis and recession.
The group, led by Vice President Joseph Biden, canceled its scheduled meeting Thursday. The suspension of the group's work could mark the beginning of the final stage of budget negotiations, which most participants had long assumed would be concluded by the president, the speaker and Senate Majority Leader Harry Reid (D., Nev.)
"We've reached the point where the dynamic needs to change," Mr. Cantor said in an interview with The Wall Street Journal. "It is up to the president to come in and talk to the speaker. We've reached the end of this phase."
Congressional and White House officials remained optimistic that higher-level talks could build on the tentative agreements reached by the Biden group. Mr. Cantor said the group had identified more than $2 trillion in spending cuts over the next ten years. However, a Democratic official close to the talks said the total was only about $1.2 trillion.
"As all of us at the table said at the outset, the goal of these talks was to report our findings back to our respective leaders,'' Mr. Biden said. "The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support. For now the talks are in abeyance as we await that guidance."
Mr. Obama and Mr. Boehner (R., Ohio) had already stepped up their personal contact with each other--in a much-publicized golf outing last weekend and little-noticed meeting at the White House on Wednesday night. White House officials confirmed the meeting was held before the president gave his prime-time speech on Afghanistan, but they declined to say what the two men discussed.
Mr. Boehner was notified Thursday morning of Mr. Cantor's decision to leave the talks. The speaker said later he understood Mr. Cantor's frustrations, and that he stood willing to engage in talks with the president. "I would expect to hear from him," Mr. Boehner said.
The breakdown was not entirely surprising because, from the start, Democrats have insisted some form of new revenue or tax increases be part of the eventual solution, given the goal of reducing the projected growth in the federal deficit by $4 trillion over 10 years. At the same time, Republicans have been equally firm in rejecting any tax increases. Both sides had a political incentive to resist compromise as long as possible in talks closely watched by their political base.
At the Biden group's last meeting Wednesday, discussions over whether to include taxes were particularly contentious, Mr. Cantor said. This was unlike most meetings over the past seven weeks, in which Mr. Biden kept the talks focused on areas of possible agreement on spending cuts, while sidestepping the tax issue.
Democrats have been hopeful that Republicans might make some concessions on taxes. In the Senate last week, 33 Republicans voted to abolish tax subsidies for ethanol manufacturers.
But Senate Republican Leader Mitch McConnell (R., Ky.) has been sounding an increasingly strident message of opposition to including any tax increases in the budget deal.
--Damian Paletta and Carol E. Lee contributed to this article.
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