Image: Joe Biden
J. Scott Applewhite  /  AP
 Vice President Joe Biden returns to the Capitol last week for another day of negotiations between Republicans and Democrats in Congress on how to solve America's debt crisis and budget problems.
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updated 6/21/2011 10:46:00 AM ET 2011-06-21T14:46:00

It's getting down to crunch time for Vice President Joe Biden and a bipartisan band of lawmakers trying to craft a deal to slash the federal budget and raise the debt limit.

There's a growing sense of urgency for the group to pick up the pace and start making the politically difficult trade-offs required to generate deficit savings in the trillions of dollars rather than in billions. The game plan is for the Biden-led group to reach a tentative pact by Congress' July 4 recess.

Negotiators have snapped up easy-to-pluck savings, but agreement is lacking on the types of controversial big-ticket items that would produce major deficit cuts of the size sought by negotiators. The hope is to produce more than $2 trillion in deficit cuts over the coming decade or so, to be paired with a commensurate increase in the government's ability to borrow to avoid a first-ever default on U.S. obligations.

So far, however, neither side has put any sacred cows on the chopping block. Republicans insist the final deal won't include anything related to tax increases — even after a 73-27 Senate vote to kill a special tax break for the ethanol industry. They're also reluctant to curb the Pentagon budget.

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Democrats, meanwhile, are reluctant to offer up deeper cuts to domestic programs or even consider modest cuts to health care programs like Medicare and Medicaid unless Republicans show flexibility on revenues, like getting rid of the ethanol tax break of 45 cents per gallon.

"Balance on both sides. That's what it's going to take" to reach an agreement, Senate Finance Committee Chairman Max Baucus, D-Mont., said Monday. Baucus is representing Senate Democrats in the negotiations.

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Amid increasing worry that the talks are proceeding too slowly, the top Republican in the Senate, Mitch McConnell of Kentucky, warned in a Sunday television appearance that unless Democrats agree to long-term changes in benefit programs like Medicare it may be necessary to enact a smaller debt limit increase that would require lawmakers to revisit the battle this fall. And the Senate GOP's representative in the Biden talks, Jon Kyl of Arizona, told reporters on Monday that it may be necessary to "reassess the situation" if more progress isn't made this week.

The two sides are closest to agreement on proposals such as cutting student loan subsidies and farm programs and facilitating new auctions of the electromagnetic spectrum by allowing broadcasters to reap some of the profit from the sale. It's commonly assumed federal workers will contribute more to their pensions and that corporations will pay more to have the government guarantee their pension plans. The government is likely to sell excess property.

And both President Barack Obama and House Republicans point to more than $1 trillion in savings by claiming that the costs of military operations in Iraq and Afghanistan will quickly shrink to $50 billion a year instead of the almost $160 billion provided for 2011. The $1 trillion figure may be exaggerated, but hundreds of billions of dollars may be possible.

Video: 'Gang of Six' member on budget cuts (on this page)

Even so, such savings add up to just a fraction of what it would take to meet the twin goals of having the deficit cuts at least match the amount of increase in the borrowing cap required to keep the government afloat past next year's elections. Congressional leaders and the administration don't want a politically painful repeat vote on the debt limit before then.

A building block to any measure is capping the amount of money Congress can allocate each year for the day-to-day operations of federal agencies. Obama essentially wants a freeze at current levels, saving perhaps $1 trillion from the Pentagon and domestic agencies. Republicans want to cut domestic agencies, on average, back to 2008 levels and are more protective of the military.

Highlights of the proposals under discussion:

  • Saving at least $18 billion over 10 years by eliminating student loan subsidies to those enrolled in graduate schools. Republicans are pressing for another $47 billion by eliminating the in-school subsidies for undergraduates.
  • Requiring federal workers to contribute more to their pensions. Democrats are wary and won't allow the $120 billion-plus sought by Republicans over the coming decade, but appear to be likely to accede to some of the savings.
  • Reaping up to $28 billion over 10 years through auctioning electromagnetic spectrum.
  • Raising $10 billion or so from sale of unused federal property.
  • Cutting costs of providing prescription drugs under Medicare. The White House says it can reap $200 billion by requiring additional rebates from drug companies and allowing the government to negotiate with drug companies within Medicare. But the drug industry has strong support from lawmakers in both parties, and powerful Democrats haven't forgotten its support for Obama's massive health care overhaul.
  • Cutting Medicare payments for durable medical equipment like home hospital beds and oxygen tanks.

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

Video: Debt talks resume

  1. Closed captioning of: Debt talks resume

    >> vice president is stepping up the pace of negotiations over the debt limit. mr. biden returns to the capital for a 2:00 meeting coming up with two more sessions planned over this week. with the july fourth recess looming, the parties are more than a trillion dollars apart. ken joins us. if you can find a trillion dollars, maybe you can solve the problem. they really do have a big gap to fill. what's so striking, ken, if you talk to people involved from the vice president's side and and the republican's side, they seem to be getting along. that cantor and biden are talking. this is not as contentious a session as you might have expected.

    >> that's right. that's the name of the game . both sides have an interest in striking a deal and striking a deal well before the deadline avoiding an 11th hour showdown like we saw over the budget recently. but getting along and finding another trillion dollars in cuts are different matters and with republicans being -- with both sides being unwilling to touch entitlements, defense spending , democrats willing less willing to touch domestic spending, social welfare spending, you see where the challenge is.

    >> the president told ann curry is that the republicans are resistant to any talk about revenue. they've made that clear on the record, off the record. the democrats don't want to go for some of these big budget cuts. one thing that does strike me as maybe we're all being spun, maybe each sides wants to avoid being blamed for the failure, the breakdown that leads to a debt ceiling crisis. so everyone's talking about being cozy many the room, but they really aren't getting anywhere.

    >> i don't know.

    >> that seems to be sort of the standard thing. there are these very hard positions that we've seen. you don't have to look any further than the breakdown, the impasse that was reached by this gang of six that looked like they were on pace toward a very significant deal that would cut $4 trillion in spending. but just touched a little bit too much in the entitlement programs and fell apart.

    >> thank you.

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