10-day deadline eyed for debt deal

President still pushing for $4 trillion reduction pact

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WASHINGTON — Grasping for a deal on the nation’s debt, President Barack Obama and congressional leaders remained divided Sunday over the size and the components of a plan to reduce long-term deficits. Noting the need to work out an agreement over the next 10 days, the president and lawmakers agreed to meet again today.

Obama also scheduled a news conference for this morning, his second in less than two weeks.

Officials familiar with the meeting said Obama pressed the eight House and Senate leaders Sunday evening to continue aiming for a massive $4 trillion deal for reducing the debt.

But there appeared to be little appetite for such an ambitious plan and the political price it would require to pass in Congress. House Speaker John Boehner told the group that a package of $2 trillion to $2.4 trillion was more realistic.

A Democratic official familiar with the session said House Majority Leader Eric Cantor, R-Va., was especially adamant that any deficit reduction package could not contain tax increases and that any new tax revenue would have to be used to pay for other tax benefits.

When a reporter asked, “Can you work it out in 10 days, sir?” Obama replied, “We need to.”

Obama and the congressional leaders met in the Cabinet Room of the White House for the rare Sunday session. Time is becoming increasingly precious in the negotiations. The deficit-reduction talks are linked to the government’s need to increase its borrowing limit, now capped at $14.3 trillion. The Obama administration says if the debt ceiling is not raised by Aug. 2, the nation would default on its obligations, with potentially calamitous financial consequences worldwide.

Officials familiar with the meeting said Obama time and again pressed for a larger package. He also pointed out that the smaller deal of up to $2.4 trillion still would require tax revenues and that not all of the details had yet been worked out.

“We’re going to try to get the biggest deal possible,” said Treasury Secretary Timothy Geithner.

It was an abrupt change from 24 hours earlier. Republicans late Saturday rejected the $4 trillion proposal, the largest of three under consideration, because its tax increases would doom it in the GOP-led House, Speaker John Boehner said.

The Ohio Republican informed Obama that a package of about $2 trillion, which bipartisan negotiators had identified but not agreed to, was more realistic.

The International Monetary Fund’s new chief, Christine Lagarde, said that if the U.S. fails to raise its debt limit, she foresees “interest hikes, stock markets taking a huge hit and real nasty consequences” for the American and global economies.

“I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also the rest of the world,” she said.

Republicans have demanded that any plan to raise the debt limit be coupled with massive spending cuts to lighten the burden of government on the struggling economy. Higher taxes, Republicans have said from the start, are deal-killers if not offset elsewhere.

But Obama has a long way to go to satisfy lawmakers in his own party, too. Many Democrats are unnerved by the president’s $4 trillion proposal because of its changes to Medicare and Medicaid.

Geithner cautioned that a package about half the size of the one Obama prefers would be equally tough to negotiate because it, too, could require hundreds of billions in new tax revenue — anathema to Republicans. Lawmakers said that previous bipartisan talks, led by Vice President Joe Biden, identified actions that would be needed even for the more modest packages.

The package of $2 trillion to $2.4 trillion in deficit reduction identified by the Biden-led negotiators would require some increase in tax revenue. Republicans walked out of those negotiations after they were unable to accept about $400 billion in new tax money that the White House proposed by closing loopholes, ending some corporate subsidies, and limiting the value of deductions for wealthy taxpayers.