* No follow-up talks set for Obama, Republicans
* Five weeks until Aug. 2 deadline
* Republicans want to separate tax debate from debt talks
By Andy Sullivan
WASHINGTON, June 28 U.S. Democrats and
Republicans on Tuesday showed no sign of resolving an impasse
over taxes that has stalled budget negotiations and could
threaten the country's top-notch credit rating.
The two sides will not make progress on a deal to extend
the U.S. borrowing authority as long as Democrats continue to
push for tax increases, the Senate's top Republican said.
"The path forward ... seems to be blocked by the insistence
on raising taxes in the middle of an economic slowdown," Senate
Republican leader Mitch McConnell said at a news conference,
one day after meeting with President Barack Obama.
Democrats accused Republicans of protecting perks for the
wealthy at the expense of efforts that would allow the country
to avoid a catastrophic default.
"Republicans walked away from the negotiating table to save
tax breaks for corporate jets," Senate Democratic leader Harry
Reid said on the Senate floor.
The Treasury Department has warned it will run out of money
to pay the country's bills if Congress does not raise the $14.3
trillion debt limit before Aug. 2.
Even if a deal is reached soon, lawmakers will need time to
turn the proposal into legislative language, sell it to their
constituents, and pass it through the House of Representatives
and the Senate -- a process likely to take weeks.
"The last thing anyone wants is to have some kind of
agreement down at the White House behind closed doors
parachuted in and say, 'Well, representatives and senators,
you've got three days to think this over and vote on it.'
That's wrong and we're not going to allow that," said
Republican Senator Jon Kyl, who was involved in discussions
that collapsed last week over tax increases.
Financial markets have shown little sign of concern so far,
but that could change as the Aug. 2 deadline approaches.
DEAL NOT LIKELY SOON
A deal does not appear likely any time soon. Obama has met
separately with McConnell and House Speaker John Boehner, the
top Republican in Washington, but no follow-up meetings have
been set, aides said.
Obama will meet with Senate Democrats on Wednesday,
according to the White House, but that appeared to be news to
Reid. "I didn't know I was going to be visiting with him
tomorrow," he told reporters.
Aides from both parties suggested there would be little
reason to hold meetings as long as the two sides remain at odds
over tax increases.
Democrats say the $1.5 trillion to $2 trillion in spending
cuts that the two sides have tentatively identified must be
augmented by $400 billion in new tax revenue over the coming
10 years. That money would come by closing a range of tax
breaks for hedge-fund managers, private jets and specific
business sectors. [ID:N1E75R1CD]
"We believe there is the opportunity here for a substantial
compromise on a significant deficit reduction agreement that is
done in a way that's balanced," White House spokesman Jay
Carney said aboard Air Force One.
As Obama spoke at a manufacturing plant in Iowa,
Republicans and business groups said that one of the tax breaks
he would like to end -- the "last in, first out" inventory
accounting method -- would hurt job creation efforts at a time
when the unemployment rate remains stuck at 9.1 percent.
Republicans want the savings from ending tax breaks to go
toward lower income-tax rates, rather than deficit reduction.
The two sides have also struggled to find mutually
agreeable ways to slow the growth of health costs, which are
projected to nearly double over the coming decade.
Republican Tom Coburn, one of the Senate's foremost fiscal
conservatives, and Senator Joe Lieberman, an independent who
usually votes with Democrats, proposed gradually raising the
eligibility age for the Medicare program to 67 from 65, and
paring benefits for wealthy retirees.
That plan would save more than $600 billion over 10 years,
but it was flatly rejected by Democratic leaders.
(Additional reporting by Donna Smith and Caren Bohan; editing
by Mohammad Zargham)