Congressional leaders will return to the White House today to continue negotiations on raising the debt ceiling and lowering the deficit.
Talks have taken a few steps backwards over the past few days over proposed entitlement spending cuts and tax increases.
President Barack Obama wants a deal before July 22 to allow Congress time to act on the agreement before the default deadline of August 2.
So where do the parties stand this morning?
The $4 trillion deficit reduction package is dead.
Floated last week by President Barack Obama and Speaker of the House John Boehner, its tax reforms proved too much for Republican lawmakers to handle. Democrats also bucked at the entitlement spending cuts Obama proposed to reign in spending.
The talks are now returning to a more modest $2.5 trillion deal first discussed in talks led by Vice President Joe Biden.
President Obama is standing by his pledge that the debt ceiling increase must include a 'balanced approach' to deficit reduction -- which means new revenues.
Obama is willing to agree to deep spending cuts -- including cuts to Medicare and Medicaid -- in exchange for the elimination of corporate subsidies or other reforms of the tax system.
In a press conference yesterday, Obama stressed that any new taxes would be effective in 2013, so as not to impede economic recovery.
Speaker of the House John Boehner (R-OH) wants to make a deal to raise the debt ceiling -- that we know. What is also clear is that the ranks of his supporters in the House GOP caucus are shrinking.
In light of news that he was considering as much as $1 trillion in new revenues, he faced significant opposition from members of his own party for going to far to reach a deal.
Boehner has been forced into rejecting any tax increases, and into making any cuts to subsidies and loopholes conditional on entitlement cuts.
House Majority Leader Eric Cantor (R-VA) is the voice of the conservative bloc of the House GOP caucus, including its class of 87 freshmen.
Cantor quit the Biden deficit reduction talks last month, claiming he would not negotiate with Democrats as long as tax increases were on the table. He has argued that any cuts to corporate subsidies need to be revenue-neutral, with the deficit reduction coming solely from slashing spending.
An increasingly vocal member in the White House negotiating sessions, his influence over the talks appears to have eclipsed that of Boehner. Cantor is pushing for Republicans to take a hard-line approach to the talks -- and to end the talks if the terms are not acceptable.
In recent days he has advocated that the final deal closely resembling the framework discussed in the Biden talks he walked out of -- which currently only includes mutually agreed upon spending cuts, but no revenues.
House Minority Leader Nancy Pelosi (D-CA) was left in the dark when President Obama and Boehner discussed entitlement cuts as part of a 'grand bargain' deficit reduction package.
Since, she has rallied her caucus in opposition to any cuts to Medicare and Medicaid benefits-- and she insists Social Security not be included in any deal.
With the strong support of the liberal wing of House Democrats, her support for any deal that includes substantial entitlement cuts -- no matter how much new revenue is raised -- is in doubt.
House Minority Whip Steny Hoyer (D-MD) is one of the last of the moderate 'Blue Dog Democrats,' and his support is essential to any deal passing the House.
He is open to steeper entitlement cuts than Pelosi if Republicans agree to include revenues as part of the deficit reduction package.
Because the Senate is Democrat-controlled and more moderate than the House, a debt ceiling increase and deficit reduction bill would have a much easier time passing the upper chamber.
Moderate Republican Sens. Susan Collins and Olympia Snowe, both of Maine, are already laying the groundwork for a compromise -- opposing benefit cuts to entitlement programs, while supporting the elimination of corporate subsidies and tax loopholes.
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