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updated 5/11/2011 11:52:50 AM ET 2011-05-11T15:52:50

President Barack Obama is wading into the swirl of deficit-trimming budget plans, looking to cast himself as a broker in the struggle to tame the federal debt.

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The White House and congressional Democrats and Republicans are working to sort out what debt-fighting measures they can embrace now and which ones will be left for later, probably after the 2012 presidential and congressional elections.

The president was to host Senate Democrats at the White House on Wednesday and Senate Republicans on Thursday. The meetings come as Vice President Joe Biden leads bipartisan efforts to identify some of the less politically explosive areas of the budget that could be reduced as a first installment in the effort to contain the debt.

Obama has been calling for long-term deficit reduction that blends both tax increases and changes to massive government health programs such as Medicare for older adults and Medicaid for the poor. Some Democrats are anxious for Obama to detail his proposals, worried that he might cut too deeply into venerable Democratic initiatives. Meanwhile, Republicans have proposed restructuring Medicare and Medicaid but have rejected any tax increases.

Story: Boehner: 'Trillions' in cuts loom on debt vote

Entitlements, tax overhauls
While White House officials and some top Republicans concede that major entitlement programs and tax overhauls are not in store for this year, the two issues are beginning to define the parties in time for the campaign season.

Story: Don't count out 'Gang of Six' budget group yet

Clashes flared anew Tuesday over Democratic proposals to raise taxes or do away with some corporate tax breaks.

Story: GOP won't push Medicare cuts at budget talk

Senate Budget Committee Chairman Kent Conrad, D-N.D., raised the idea of an extra tax on the wealthiest taxpayers, Democratic officials said, and the Senate's Democratic leader, Harry Reid of Nevada, called for an end to tax subsidies for oil and natural gas companies. House Speaker John Boehner and Senate Republican leader Mitch McConnell both staked out seemingly unyielding positions against tax increases.

Obama, speaking at a Democratic fundraising event Tuesday evening in Austin, Texas, reiterated his call for doing away with Bush-era tax cuts for individuals who make more than $200,000.

McConnell, speaking on the Senate floor Wednesday, characterized Reid's effort to eliminate tax breaks for the five largest oil companies as "raising taxes on American energy." "By taxing American energy production," McConnell said of Democrats, "they're also outsourcing American jobs."

Obama, speaking at a Democratic fundraising event Tuesday evening in Austin, Texas, issued his own call for ending oil and gas subsidies and reiterated his demand to do away with Bush-era tax cuts for individuals who make more than $200,000.

"If we want to reduce our deficit, our sacrifice has to be shared," Obama said. "And that means even as we're making spending cuts, we also have to end the tax cuts to the wealthiest 2 percent of Americans in this country."

Story: Obama criticizes Republican position on immigration

It's a pitch he's also likely to take to a CBS-sponsored town hall-style meeting Wednesday in Washington.

Obama's recent bounce
Obama is turning his focus to fiscal issues at a high point in his presidency. The U.S. killing last week of Osama bin Laden has boosted his public approval, though such support could be fleeting in the face of a slow economic recovery.

Story: Poll: Economy fears temper Obama's bin Laden bump

Attention to the debt and long-term deficits has taken on greater urgency because the administration has told Congress it has until Aug. 2 before the nation reaches its borrowing limit. Republicans see any vote to extend the debt ceiling as critical leverage for spending cuts.

The last increase in the debt ceiling was in February of last year, from $12.4 trillion to $14.3 trillion. Boehner this week said any further increase must be matched with equal cuts in spending.

For now, the more immediate — and less ambitious — work is up to the bipartisan budget negotiators who met with Biden for the second time in a week Tuesday.

Story: Biden seeks to cut deal on U.S. deficit reduction

Biden, emerging from a two-hour meeting with congressional negotiators across from the White House, voiced optimism about the talks but indicated that top House and Senate leaders might ultimately have to become involved to seal any bargain.

"Whether we get to the finish line with this group is another question," he said. Another round of talks is scheduled for Thursday.

Cantor signals flexibility
One of the Republicans' top negotiators with Biden, House Majority Leader Eric Cantor of Virginia, signaled flexibility Tuesday. Cantor said the talks were designed to find where the White House, Democrats and Republicans were "in terms of commonality right now" and indicated that an agreement on spending cuts in broad terms could be enough to win support for increasing the debt ceiling.

Still, he said, "there's got to be assurances that the commitments are real" to cut spending.

White House spokesman Jay Carney acknowledged this week that there are limits to what Biden and the bipartisan group of six lawmakers can achieve.

Story: Can automatic spending cuts solve deficit dilemma?

"The reason why this hasn't been resolved in so long is because it's hard and it takes time," Carney said. "And it may be the case that all of these issues do not get resolved in these negotiations, but a number of them can."

He added, "If there are other issues that remain unresolved, we'll deal with them when there is the environment that's conducive to dealing with them."

That could require an election first.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Geithner: Congress has to raise debt limit

  1. Transcript of: Geithner: Congress has to raise debt limit

    MR. GREGORY: Good morning. Millions of Americans will rush to file their tax return by tomorrow's deadline at a time when taxes are at the heart of the budget debate here in Washington . The spending fight and high gas prices, with a national average now of $3.83 a gallon, top of mind for the president's chief economic adviser, Treasury Secretary Tim Geithner . I sat down with him yesterday at the Treasury Department . There's so much to get to. I want to begin with the next big fight here in Washington . The government nearly shut down because this year's budget. Now there's the decision to raise the credit limit on America 's credit card, with the debt at $14 trillion. That is, raising the debt ceiling. Will the president agree, as Republicans demand, to tie spending cuts to an agreement to raise the debt ceiling?

    SEC'Y TIMOTHY GEITHNER: David , let me tell you how we're going to do this. Congress is going to have to raise the debt limit. They understand that. That's absolutely essential to preserve the creditworthiness of the United States of America. You know, we're a country that meets its obligations, and we have to meet our obligations, and they recognize that. I heard -- in fact, I heard the leadership tell the president that again on Wednesday.

    MR. GREGORY: But you hear so many Republicans saying, "No, no, there's got to be a deal here."

    SEC'Y GEITHNER: But, but, but as we do that, in parallel to that, we're going to work with the Republicans and Democrats and try and get people to come together on a long-term plan to bring our fiscal position back down towards balance so we're living within our means again. We have to do both those two things. And we're going to work very hard again to take advantage of this opportunity to get Democrats and Republicans to come together.

    MR. GREGORY: But does there have to be a link?

    SEC'Y GEITHNER: I think you can do these things in parallel. And I'll -- let me say it this way. You know, we're going to move forward, and we want -- again, we want Congress to put in place a comprehensive framework, a balanced framework, that can reduce our long-term deficits. And we're going to work hard to do that. But if, by the time we need to raise the debt limit, we haven't worked all that out, Congress still has to raise the debt limit. Again, leadership recognize that. They don't -- they know...

    MR. GREGORY: Or, or else what? Because they say a lot of your warnings are overblown. Those like Senator DeMint of South Carolina say those warnings about, you know, the catastrophe are overblown.

    SEC'Y GEITHNER: Oh, that's absolutely not the case. And again, I think -- I've spent a lot of time with Republicans and Democrats on this -- you know, I saw the Senate Finance Committee last week -- and they absolutely understand the stakes in this. And the leadership understand that you can't play around with this, you can't take it too long. And those people up there who are telling people that you can take this to the brink because it gives them some leverage, they're going to own the responsibility for the risk that creates for the American economy .

    MR. GREGORY: And what are the stakes?

    SEC'Y GEITHNER: Well, again, if you just think of it this way, if you allow people to start to doubt whether the United States of America will meet its obligations, that would be catastrophic, and we can't take that risk. But again, the responsible people up there understand that, and I'm very confident they'll do this. And I heard them say that, that to the president on Wednesday. Again, they said that, "We, we recognize we can't play around with this."

    MR. GREGORY: Do you think this risks another shutdown?

    SEC'Y GEITHNER: I don't think so. Again, I think if you, if you listen carefully -- I know there's a lot of politics in the moment, but if you listen carefully to what people are saying, a very important thing has happened. You've seen the Republican leadership say we need to try and cut about $4 trillion from our deficit over about 10 years. You saw a bipartisan fiscal commission the president established lay out basically the same target. And the president of the United States on Wednesday laid out a balanced, responsible plan that achieves about the same level of deficit reduction over about the same period. We take a little longer because we want to go a little more gradually. But when you have leadership of Republicans and Democrats saying that, "This is the right thing to do for the economy now. We all agree on how much you have to do," that's very important. And what we like to -- Congress to do is, again, before we get too far into June we want Congress to agree on concrete targets, deadlines, timelines, and an enforcement mechanism that will force Congress to live within its means over the next three to five years.

    MR. GREGORY: OK, but one more on the debt limit. When he was Senator Obama , he voted against raising the debt limit in 2006 .

    SEC'Y GEITHNER: He did. And he said...

    MR. GREGORY: And he said, he said at the time that the debt problem was a, quote, "failure of leadership , and Americans deserve better." Look, the debt has gone up 35 percent during his presidency. Is that also a failure of leadership ?

    SEC'Y GEITHNER: You know, you, you heard him say this week that that was a mistake. He recognized that's a mistake, and he recognizes that's not something you can play politics with. You know, Steny Hoyer said in the -- on the floor something similar earlier this year. He said that, "I thought this was something you could demagogue. I was wrong at that point. Not something you can play politics with." Again, that it's -- this is a absolutely critical thing for people to understand. This is about the trust and confidence in the American people , and the world is watching us. Markets around the world are watching Washington to see whether this political leadership , Republicans and Democrats , understand that we need to get on with it and start to bring down the long-term deficits. And, of course, as we do that, as we work that out, Congress will pass the debt limit.

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