Boehner to seek smaller $2 trillion deal

Boehner to seek smaller $2 trillion deal

President Barack Obama crosses the South Lawn of the White House to board Marine One, Saturday, July 9, 2011, in Washington, as he travels to Camp David, the Presidential retreat in Catoctin Mountains near Thurmont, Md.

WASHINGTON (AP) -- House Speaker John Boehner has informed president Barack Obama that he wants to pursue a smaller $2 trillion deficit reduction deal, not the larger effort sought by the White House.

Boehner said the White House wanted tax increases in a deficit reduction deal of as much as $4 trillion over 10 years.

Republicans have been adamant that they would not support higher taxes. Instead, Boehner said negotiators should focus on deficit reductions identified by a bipartisan group led by Vice President Joe Biden.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

President Barack Obama appealed to Democrats and Republicans to "make some political sacrifices" and take advantage of an extraordinary opportunity to tackle the government's budget crisis.

Obama said in his weekly radio and Internet address Saturday that it will take a "balanced approach" that mixes limits on domestic programs and the Pentagon, curbs to Medicare and elimination of some tax breaks for the wealthy.

Obama spoke a day before hosting top lawmakers in both parties for a negotiating session at the White House

Even as the negotiators seek a grand deal to bring the deficit under control, Obama's Democratic allies and GOP rivals seem to find their options limited by months of angry rhetoric and political posturing.

Sharp divisions persist over increasing taxes and cutting public benefit programs. As a result, hopes have diminished for a deal on an ambitious plan to cut spiraling deficits by $4 trillion or more over the coming decade. Officials now say a smaller, $2 trillion agreement, appeared more doable.

"The good news is, we agree on some of the big things," Obama said. "We agree that after a decade of racking up deficits and debt, we finally need to get our fiscal house in order. We agree that to do that, both sides are going to have to step outside their comfort zones and make some political sacrifices."

The president was spending part of the weekend at Camp David, the presidential retreat in Maryland. He left on Marine One on Saturday morning, accompanied by senior adviser Valerie Jarrett and family friend Eric Whitaker.

Obama was scheduled to return Sunday afternoon, several hours before his early evening meeting with congressional leaders.

On Friday, Obama's most important negotiating partner, House Speaker John Boehner, R-Ohio, said that the two sides were far apart.

"It's not like there's some imminent deal about to happen," said Boehner. "There are serious disagreements about how to deal with this very serious problem."

Obama cited a bleak jobs report Friday in hopes of prodding Congress toward a swift agreement. But the higher unemployment numbers hardened the views of partisan lawmakers who think a weak economy can't tolerate added taxes or cuts in spending, essential parts for the broad deal that Obama seeks.

White House and congressional negotiators and their aides continued to work on deficit-cutting ideas to add to a set of proposals tentatively agreed to in talks led by Vice President Joe Biden in May and June. The earlier proposals would shave $2 trillion or so off the deficit. Obama has asked the top eight leaders of Congress to come to the White House on Sunday to assess progress in the talks.

A budget agreement is central to increasing the nation's borrowing limit, currently capped at $14.3 trillion, by Aug. 2.

If that deadline isn't met, there could be a potentially catastrophic government default on obligations to bondholders, government contractors and people relying on Social Security and other government programs. That deadline and a new unemployment rate of 9.2 percent heightened the pressure for a deal, uniting the two most high-profile challenges facing Obama's presidency.

Obama urged Congress to move quickly to raise the debt ceiling, saying the uncertainty over a potential default has hindered hiring in the private sector.

He later made his case privately to House Democratic leader Nancy Pelosi of California during a half-hour meeting at the White House.

Both parties and private economists agree that if Washington does not raise the debt ceiling by early August, the economy could slip back into recession.

The White House and Congress are seeking common ground on a budget deal that would trim 10-year deficits by as much as $4 trillion. Obama has urged lawmakers to strive for that number, but some officials on Friday said they believed that a smaller, $2 trillion deal appeared more realistic.

The larger package would require new tax revenues and significant spending reductions in large government benefit programs such as Medicare, Medicaid and Social Security.

But liberal Democrats whose votes will be needed to balance GOP defections and get a deal passed recoiled over the possibility that Obama would endorse cuts to Medicare or Social Security. For example, the administration and lawmakers are looking at less generous adjustments for inflation, which would reduce future Social Security payments.

"I'm a Democrat. I got elected to Congress to protect Social Security and Medicare, not dismantle them," said Rep. Jim McGovern, D-Mass. "Yes, we do need entitlement reform, but we need to do this thoughtfully, not come to a deal in a weekend."

Republicans played down media reports suggesting that Boehner was willing to entertain the possibility of higher tax revenues as part of a "grand bargain" that included cuts to benefit programs like Social Security and Medicare.

"Conservatives are just not going to vote for a tax increase on this economy," Rep. Trent Franks, R-Ariz., said, reflecting a common view among his GOP colleagues. "It's just not going to happen."

On health care, negotiators have been closing in on cuts of about $200 billion over 10 years, about equally divided between Medicare and Medicaid, with most of the burden falling on individual industries such as hospitals, drug manufacturers and nursing homes.

One Social Security proposal on the negotiating table would lower annual cost-of-living increases, reducing the retirement benefits for older Americans over the long term.