* White House cites progress in negotiations
* Republicans say disagreement over taxes
* Bernanke warns against delaying debt limit increase
By Richard Cowan
WASHINGTON, May 12 White House-led negotiations
to reduce massive U.S. budget deficits and raise the United
States' credit limit laid bare deep divisions on Thursday over
whether tax increases could be part of any solution.
Vice President Joe Biden, who heads a deficit-reduction
working group including key members of Congress, said the talks
were difficult, but "we're actually making progress."
After a promising start last week in which Republican
leaders spoke of finding common ground over short-term budget
savings while leaving more contentious issues for after 2012
elections, the discussions became more difficult as negotiators
got down to specifics.
Senate Republicans reiterated in talks with President
Barack Obama there was a need to raise the national debt
ceiling, the White House said. The news cheered investors who
fear hang-ups over deficit-reduction will spoil chances of
promptly increasing the congressionally set $14.3 trillion cap
on government borrowing. That cap will be hit on Monday.
For full debt ceiling coverage [ID:nUSBUDGET]
Debt limit debate to stretch to July [ID:nN09265886]
FACTBOX-Treasury's debt limit delay tools [ID:nN09266402]
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U.S. public debt outstanding versus debt ceiling since 1970
But it wasn't all good news.
Following Obama's meeting with Senate Republicans, Senator
Tom Coburn said "there was not a lot of agreement." Asked to
explain the differences, he said, "Taxes and how you fix
Medicare," the healthcare program for the elderly.
The stumbling blocks, which were predictable, come as
Washington faces crucial deadlines.
When the United States exhausts its legal borrowing
authority on Monday, the Treasury will have to take
extraordinary measures to pay bills until Aug. 2. After that
date, it risks its first-ever federal government default.
Federal Reserve Chairman Ben Bernanke warned lawmakers on
Thursday that if Congress is slow to increase the debt limit
the result could be higher interest rates. At worst, he said,
there could be "extremely dire consequences for the U.S.
economy," which already suffers from a 9 percent jobless rate.
Republicans, however, want to seize upon voter anger over
the size of the federal government and budget deficits hovering
around $1.4 trillion a year to win massive spending reductions
-- in the trillions of dollars, House of Representatives
Speaker John Boehner told the Wall Street earlier this week.
White House economic adviser Austan Goolsbee said cutting
trillions from spending was "insane," but Boehner hit back on
Thursday, telling reporters, "What we ... are asking for isn't
He declined to offer details on his timeframe for achieving
Tax policy could be the hot-button issue for weeks to come,
as negotiations are expected to extend at least into July.
Republicans have repeatedly said tax increases are off-limits
in the deficit-reduction/debt limit talks.
OIL AND TAXES
Obama has outlined tax initiatives he wants to include in
budget and debt limit negotiations: The repeal of some tax
breaks for the five major oil companies amid tens of billions
in company profits; ending former President George W. Bush's
tax breaks for those earning over $250,000 a year, and some
automatic tax increases over the longer term if deficit-cutting
Republicans have said they are willing to look at revamping
the tax code, including closing wasteful loopholes. That is a
huge effort, however, that cannot be handled in the pressing
debt limit negotiations. As for repealing Big Oil's tax breaks,
Republicans argue that should be debated in the broad tax
reform effort later.
Biden said all issues remained on the negotiating table,
including Medicare, which both sides agree needs to be reformed
-- but not on how to do it. Talk of large benefit cuts, as
Republicans have proposed, has triggered a public backlash.
Biden said his high-level meetings with lawmakers will
resume after the House returns from a one-week break. In the
meantime, aides will continue negotiating.
(Additional reporting by Thomas Ferraro, Donna Smith and Jeff
Mason; Editing by Philip Barbara and Todd Eastham)