Obama Turns His Attention To Deficit Reduction

After weeks of leaving deficit-reduction talks to Vice President Biden, President Obama will meet personally with Republican and Democratic leaders of the Senate. They're trying to work out a plan to stem the tide of red ink. But no matter what happens, the government will need to keep borrowing money. And that means lawmakers will need to raise the federal debt ceiling within the next five weeks.

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STEVE INSKEEP, host:

It's MORNING EDITION, from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne.

President Obama turns his attention to the deficit today. After weeks of leaving deficit reduction talks to the vice president, Mr. Obama will meet personally with Republican and Democratic leaders of the Senate. They're trying to work out a plan to stem the tide of red ink. No matter what happens, the government will need to keep borrowing money, and that means lawmakers will need to raise the federal debt ceiling within the next five weeks.

Joining us now to talk about the budget wrangling and other political news is NPR White House correspondent Scott Horsley.

Good morning.

SCOTT HORSLEY: Good morning, Renee.

MONTAGNE: And so the president's personal involvement in the deficit talks comes after negotiations hit a wall last week, when House Republican leader Eric Cantor walked out. Where do things stand as of this morning?

HORSLEY: Well, that's right, Renee. Congressman Cantor said he would no longer take part in the talks, because Democrats have been insisting that any deficit reduction package should include not only spending cuts, but also tax increases. Now, every bipartisan group that's looked at this has said the same thing, but Republicans argue tax hikes should not be on the table.

Here is Senator Mitch McConnell speaking yesterday on ABC's "This Week."

(Soundbite of TV show, "This Week")

Senator MITCH MCCONNELL (Republican, Kentucky): Throwing more tax revenue into the mix is simply not going to produce a desirable result, but it won't pass. I mean, putting aside the fact that Republicans don't like to raise taxes, Democrats don't like to, either.

HORSLEY: And he's right about that. Neither party likes to raise taxes, and both parties tend to spend a lot of money. So that's how we've gotten into the deep hole that we find ourselves in.

Right now, government spending - relative to the size of the economy - is at historically high levels. And at the same time, tax revenues - relative to the size of the economy - are the lowest they've been in decades. The White House says it has to go at that problem from both sides: spending cuts and tax increases. That's the case that Mr. Obama will be making later today when he meets with Senator McConnell.

MONTAGNE: And all this coming to a head at this moment in time because of that debt ceiling.

HORSLEY: That's Right. We have really already reached the debt ceiling, and the Treasury Department has been busy moving money and IOUs around in order to keep us from going over the limit. They say they can do that for another month or so, but Treasury says they're going to run out of wiggle room on August 2nd. And so they really need lawmakers to raise the debt ceiling by that time.

Now, it's always unpopular for lawmakers to vote to raise the debt ceiling, but in this case, every budget - including the budget passed by House Republicans -calls for the government to keep borrowing money for years to come. So the debt ceiling will have to be raised. And the real question is what kind of political cover lawmakers can negotiate for themselves in return.

They don't have a whole lot of time to play with, here. The House is out of session this week. The Senate will be out next week. So by the time they're both back at work, they'll have about three weeks to make it to that drop-dead date.

MONTAGNE: And, Scott, in other news, tomorrow, President Obama will visit an Alcoa factory that makes aluminum. Is this part of his push for what he's calling advanced manufacturing?

HORSLEY: It is. Manufacturing has been one of the better parts of the economy during an otherwise tepid recovery. Factories have added something like 240,000 jobs over the last year and a half, and the president would very much like to continue that trend, because factory jobs tend be better paying and have better benefits than service jobs.

This is not just about sort of repairing the short-term economy, but really making longer-term fixes in what's been a decade of middle class stagnation.

On Friday, the president was in Pennsylvania to talk up a partnership with business and universities to promote advanced manufacturing. And tomorrow, he'll tour a factory that's an example of that, which just happens to be in the swing state of Iowa.

MONTAGNE: And another person who just happens to be in Iowa is a political rival of President Obama's, Republican Congresswoman Michele Bachmann.

HORSLEY: That's right. Just this morning, in Iowa, Michele Bachmann announced that she's running for president, for anyone who might have missed her announcement last week during the GOP debate. And Bachmann is an Iowa native who did very well over the weekend in a poll by the Des Moines Register of likely GOP caucus-goers. She finished, really, tied for first place with Mitt Romney, both of them well ahead of the rest of the Republican pack.

Bachmann's brand of Christian conservatism is playing very well in the field of voters in Iowa who are likely to take part in the GOP caucuses.

And then, just to stir the pot a little bit more, Sarah Palin will be in Iowa later this week.

MONTAGNE: OK. NPR White House correspondent Scott Horsley, thanks very much.

HORSLEY: You're welcome.

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