WASHINGTON (Reuters) – President Barack Obama sought on Monday to narrow the gap between his Democrats and Republicans over raising the debt ceiling, but neither side sounded inclined to compromise ahead of the talks.
Obama met Senate Democratic leader Harry Reid for a little over 30 minutes at the White House and is scheduled to sit down with Senate Republican leader Mitch McConnell at 5 p.m. (2100 GMT).
Reid left the White House without talking to reporters and it was not immediately clear if the ground covered in the meeting would be made public.
Time is running out ahead of an August 2 deadline to raise the borrowing limit. Administration officials said the most important thing was to keep both sides talking, which was why negotiations had escalated to the president.
Talks led by Vice President Joe Biden broke down last week over Democrats' demands to include raising tax revenues alongside spending cuts to lift the $14.3 trillion borrowing limit before the government runs out of cash on August 2.
Failure to act risks the United States defaulting on its financial obligations, which could push the country back into recession. Obama is also trying to ease public concern over his handling of the deficit, which is likely to be a key topic as he seeks re-election next year.
The federal deficit stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.
McConnell has stuck firmly to his party's line that revenue-raising measures were off the table.
"America does not face a debt crisis because we tax too little, but because Washington spends too much. And tax hikes can't pass the Congress. Not only is there bipartisan opposition, the consequences of massive new tax hikes would be fewer jobs," he wrote in an opinion piece for CNN on Monday.
Obama met with House of Representatives Speaker John Boehner, a Republican, and House Minority Leader Nancy Pelosi, a Democrat, last week. The House is not in session this week and many members, including Boehner, are back in their districts.
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The debt ceiling needs to be raised by around $2.4 trillion to ensure that the government has enough money to keep functioning through the November 2012 election.
McConnell has floated the idea of a short-term funding agreement to win a couple of extra months of funding, but the administration said this should not be necessary.
"I don't see any reason to doubt that we'll be able to do a long-term extension of the debt limit accompanied by very serious deficit reduction," a senior administration official said. "We should have a long-term extension that gives people security and confidence."
Republicans say they want spending cuts to equal any increase in the limit, but the administration is pushing for a package that also includes revenues. Obama favors $3 dollars in spending cuts for every extra dollar in revenue.
Democrats are aiming at tax subsidies for oil and gas companies, so-called "carried interest" tax breaks for hedge fund managers, and loopholes that favor corporate jets.
Obama has also backed limiting tax deductions for wealthier Americans which the White House says targets millionaires and billionaires.
But Republicans contend it would also hit hundreds of thousands of small business owners and raise taxes of many American families by limiting deductions for things like mortgage interest payments.
The administration wants to frame the debate as Republicans protecting tax breaks for the rich at the expense of older Americans, and says cuts in spending must also include the Defense Department budget that Republicans traditionally protect.
"Any package of any significance that passes is going to have to have significant spending reductions, including reductions in Pentagon spending. You are going to have some of these tax loopholes for the wealthy and special interests closed," said a senior administration official.
(Editing by Vicki Allen)
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