Obama, Lawmakers Have Another Go At Debt Talks

President Obama is meeting with Capitol Hill leaders again Sunday to talk about the deal they are trying to strike on the debt ceiling and deficit reduction. The weekend talks are the latest symbol of seriousness in the long-running struggle that is nearing a deadline of potential default on federal debt. NPR's Ari Shapiro gives host Guy Raz the latest.

GUY RAZ, host: We're back with ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.

The White House and congressional leaders are talking once again about how to reach an agreement that would raise the government's borrowing limit. Earlier today, Treasury Secretary Timothy Geithner warned of the consequences of not raising that limit by August 2nd, and he was speaking on NBC's "Meet the Press."

(SOUNDBITE OF TV SHOW, "MEET THE PRESS")

Secretary TIMOTHY GEITHNER: The credit rating agencies around the world have said if Congress doesn't act by the 2nd, they will downgrade our credit, first time in history. And if that happens, you're going to see catastrophic damage across the American economy and across the global economy. It's not something we - failure is not an option.

RAZ: Last night, Republican House Speaker John Boehner pulled back from a grand plan to come up with $4 trillion in deficit reduction over the next decade. Congressional Republicans and the White House are now trying to hammer out a less ambitious plan.

NPR's White House correspondent Ari Shapiro is following the story for us. Ari, let me start with that dramatic turnabout last night. Why did Speaker Boehner throw cold water on that $4 trillion plan?

ARI SHAPIRO: Well, here's how he put it in his own words. In a statement last night, he said, despite good faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes.

After that statement, White House Communications Director Dan Pfeiffer released a statement of his own saying, we cannot ask the middle class and seniors to bear all the burden of higher costs and budget cuts. We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well. And we believe the American people agree, he said.

Your know, from the very beginning of this debate, taxes were a sticking point for Republicans. But last week, it looked like there was room for some sort of a deal, you would close loopholes, rework the tax code, increase revenue in a way that Republicans could argue was not an actual tax increase per se.

But in the last 24 hours, that has dissolved, and there's been a lot of finger-pointing since. Speaker Boehner called the president at Camp David last night and said this just wasn't going to happen. At the end of the day, apparently, Speaker Boehner could not get the Republican rank-and-file lawmakers to vote for a package that would include what they saw as those kinds of tax increases.

RAZ: That is their redline. They say they will not back an agreement if there are any tax increases. So what's on the table now?

SHAPIRO: Well, the president plans to keep pushing for a $4 trillion package, but it's hard to see how that gets accomplished. Instead, it looks like they're going to be talking about something closer to what Vice President Biden had been negotiating weeks ago with congressional leaders. That's somewhere between two and $3 trillion. That means some of this historic change that was potentially in the big package is off the table.

But it doesn't mean that the deal is any easier. You know, there's going to be political pain for both sides. And in some ways, that political pain is more palatable when you can say to voters, look, we accomplished these tremendous once-in-a-decade things. When you take those once-in-a-decade things off the table, the political pain is a bit less easy to stomach.

RAZ: They're saying that they can accomplish these $2 trillion cuts without any tax increases?

SHAPIRO: It depends on how you define a tax increase. If you eliminate loopholes, eliminate subsidies, change some details in the tax code, you can get more tax revenue. Potentially, Republicans would not consider that a tax increase, but that's what's being worked out behind closed doors in these meetings.

RAZ: So, Ari, what's likely to happen in the coming days and weeks now?

SHAPIRO: Well, more of closed-door meetings with the leaders and with staff and more pressure, because the U.S. runs out of borrowing authority on August 2nd. And after that, the country could go into default on its financial obligations. There's got to be some kind of a deal, and nobody really seems to want to do a short-term thing that would just kick the can down the road. But that seems more and more likely with each passing day.

RAZ: That's NPR's White House correspondent Ari Shapiro. Ari, thank you so much.

SHAPIRO: You're welcome.

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