Biden: Pair higher debt limit with spending cuts

By ANDREW TAYLOR and JIM KUHNHENN Associated Press

May 5, 2011, 11:34 AM EDT

WASHINGTON (AP) --

Bowing to political reality, Vice President Joe Biden on Thursday acknowledged the need to pair significant spending cuts with legislation raising the government's borrowing limit so it can pay its bills.

"They're not technically connected, but the face of the matter is they're practically and politically connected," Biden said at the start of budget meetings with top lawmakers at Blair House, the guest house across Pennsylvania Avenue from the White House.

As he spoke, the vice president glanced at House Majority Leader Eric Cantor, R-Va.

Members of both parties say the government must address out-of-control deficits in order for Congress to go along with the unpleasant task of increasing the debt ceiling beyond the current $14.3 trillion limit.

The government borrows more than 40 cents of every dollar it spends.

The White House and Republicans who run the House say a deal expected this summer probably won't produce sweeping changes to taxes and benefit programs such as Medicare and Social Security. But Cantor came to the talks with $715 billion in proposed savings from other programs, including cuts to farm subsidies and food stamps, according to an aide.

The federal deficit could reach $1.6 trillion this year, so both sides are setting modest expectations. But they said the meeting offered a chance to identify even small cuts that can build toward a broader agreement.

Treasury Secretary Timothy Geithner took some pressure off the talks when he told Congress this week that the government could continue to meet its obligations through Aug. 2. The government is borrowing an average of $125 billion a month.

House Republicans have passed a detailed budget blueprint that aims to cut spending by more than $5 trillion over the next decade. Biden sought to flesh out a plan that President Barack Obama outlined last month that would reduce deficits by $4 trillion over 12 years.

"We staked out our position in a very definite way. They haven't," Cantor said Wednesday. "So we need to understand where they're coming from."

Obama's proposal calls for about $1 trillion in higher tax revenues, a nonstarter with House Republicans. At the same time, a GOP plan to slash Medicaid and turn Medicare into a program in which future beneficiaries receive subsidies to purchase private health insurance is dead with the White House and Democrats.

In addition to Cantor, the White House invited the second-ranking Senate Republican leader, Arizona's Jon Kyl; the chairman of the Senate Appropriations Committee, Hawaii Democrat Daniel Inouye; the chairman of the Senate Finance Committee, Montana Democrat Max Baucus; and senior House Democrats Jim Clyburn of South Carolina and Chris Van Hollen of Maryland.

One proposal that some Republicans hope to add to the debt ceiling bill would cap spending at about one-fifth of the size of the economy, backed by automatic cuts if Congress failed to enact legislation that keeps spending under the limit.

That idea from Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo., is opposed by the White House. It says the plan would force drastic, across-the-board cuts to Social Security, Medicare and Medicaid while doing nothing to fix tax laws full of special breaks.

"Arbitrary spending caps are nothing but a backdoor means of imposing immediate and deep cuts in Medicare and Social Security," said Kenneth Baer, spokesman for the White House budget office.

Cantor wouldn't dismiss the idea, but he said Republicans want something concrete immediately.

"All that is fine, but the history of Congress has been that anytime you put enforcement mechanisms in place like that, ultimately they're waived," he said. "We're about trying to effect real cuts, real reforms this year."

=====================================

Biden optimistic after first deficit meeting

By Alister Bull and Tom Ferraro

WASHINGTON | Thu May 5, 2011 2:59pm EDT

WASHINGTON (Reuters) -

Vice President Joe Biden voiced optimism on Thursday as he chaired negotiations on the U.S.deficit, after Republicans signaled willingness to seek a down payment on cuts but no "grand slam" to slash spending.

A key battle between Democrats and Republicans in the 2012 election will be how to curb a bloated budget deficit. But they also must beat an August 2 deadline to raise a $14.3 trillion debt limit, or risk a damaging default that would shake the world economy.

"We're going to lay down -- not hard negotiating positions -- but let (us) make sure each of us understand where the other guy is coming from," Biden said as he began the meeting with top lawmakers from both parties.

President Barack Obama wants to raise taxes on wealthier Americans and shield cherished social spending like Social Security and Medicare for the elderly, messages central to his campaign to win re-election in 2012.

Republicans, playing on widespread voter anger over a budget deficit expected to reach $1.4 trillion this year, want to keep taxes low and slash spending, including on Medicare.

Republicans signaled a new pragmatic approach on Thursday to the deficit talks. They edged away from a contentious plan to overhaul Medicare, a central plank of their deficit-cutting plan, saying the fate of the program may have to wait until after the 2012 elections.

But John Boehner, the Republican Speaker in the House of Representatives showed no mood for compromise on his party's central demand for "real spending cuts" to accompany a rise in the debt limit.

"It is time to start talking about trillions" of dollars in cuts, he said on Capitol Hill.

Although lawmakers have sounded skeptical about how much the Biden panel can achieve in the hyper-partisan atmosphere in Washington, Republican Senator John Kyl said after the meeting that the talks had gone "just great".

Biden said progress was made at the meeting, which lasted just over two hours. He did not offer any details but the panel is due to meet again next Tuesday.

The White House has pitched Biden's negotiations with four Democratic lawmakers and two Republicans as an opening bid from the administration to forge a compromise.

"We welcome any efforts, indications, that parties to these negotiations are searching for common ground," White House press secretary Jay Carney told reporters traveling aboard Air Force One with Obama to New York for a ceremony at Ground Zero.

A bipartisan group of six senior senators -- the so-called Gang of Six -- is separately pursuing discussions to structure a deal, although they have yet to publish a plan.

The United States will bump up against the $14.3 trillion borrowing limit by May 16, although the Treasury can take steps to keep funding the government until August 2.

(Additional reporting by Matt Spetalnick, Richard Cowan, Kim Dixon, Andy Sullivan, Steve Holland, Emily Stephenson, David Morgan, and Donna Smith; Editing by Jackie Frank)

====================================

AP AUDIO Vice President Joe Biden says the participants will hear each other out on the best ways to reduce the deficit.

AP AUDIO Vice President Joe Biden says the bipartisan meeting will deal with a dual challenge.

AP AUDIO Vice President Joe Biden says he expects progress in deficit reduction talks.

AP AUDIO White House Press Secretary Jay Carney says the administration expects today's session will be productive.

AP AUDIO AP Correspondent Jerry Bodlander reports the effort to reach a deal on cutting the deficit has a little more breathing room.

Buy AP Photo Reprints

Latest Budget News

Biden: Pair higher debt limit with spending cuts

Multimedia

Obama's 2011 budget