President Barack Obama is challenging Republican lawmakers topresent a plan for a smaller-scale deficit reduction program as heattempts to steer them toward his $4 trillion goal, a Democraticaide said.

Obama plans to hold a press conference at 11 a.m. in Washingtontoday, his fifth public remarks on the debt in a week, as hepresses lawmakers to reach an agreement to raise the $14.3 trillionU.S. borrowing ceiling before an Aug. 2 deadline. The president andbipartisan congressional negotiators agreed to meet every day untilthey reach a deal, said one legislative aide on condition ofanonymity.

They are divided over taxes and entitlements. Republicans rejectDemocrats' call for more tax revenue and instead are pressing tocut entitlement programs such as Medicare and Social Security.Democrats insist even the Republicans' proposal for a smallerdeficit-cutting plan must include more taxes from higher-incomeAmericans. Obama has said he is willing to cut entitlements inexchange for a Republican agreement to increase taxes.

Democrats want to “enact an agreement that ensures America paysits bills and reduces the deficit in a balanced way without puttingall of the burden on seniors and the middle class,” RepresentativeSteny Hoyer of Maryland, the second-ranking House Democrat, said ina statement after a 75-minute negotiating session yesterday at theWhite House.

Don Stewart, spokesman for Senate Minority Leader MitchMcConnell of Kentucky, underscored Republicans' opposition to anytax increases.

'It's Baffling'
“It's baffling that thepresident and his party continue to insist on massive tax hikes inthe middle of a jobs crisis while refusing to take significantaction on spending reductions at a time of record deficits,”Stewart said after the meeting.

U.S. stock futures declined, indicating that the benchmarkStandard & Poor's 500 Index will fall for a second day. Futureson the S&P 500 expiring in September fell 1 percent to 1,328.2at 7:33 a.m. in New York.

Futures on the Dow Jones Industrial Average declined 91 points,or 0.7 percent, to 12,524. The Stoxx Europe 600 Index fell 0.8percent to 271.68 at 12:32 p.m. in London.

Obama and congressional leaders are seeking a deal to pave theway for a vote in Congress to increase the debt limit, a move theTreasury Department says is needed by Aug. 2 to avert a default onthe nation's financial obligations.

'Catastrophic Consequences'
TreasurySecretary Tim Geithner said on “Face the Nation” yesterday that theadministration wants the most comprehensive deficit-cutting dealpossible. He reiterated that failing to raise the debt limit couldhave “catastrophic” consequences for the economy.

On July 9, House Speaker John Boehner, an Ohio Republican, saidfollowing a phone conversation with Obama that, amid the stalemateover taxes, all sides must settle for a smaller plan than thepresident seeks. Before yesterday's White House meeting, Obama said“we need to” reach an agreement within the next 10 days.

During the meeting, Obama said he believed a bigger deal mightbe politically easier, with both sides making philosophicallydifficult concessions, said a Democrat familiar with thediscussions. The president asked Republicans to return today withdetails of their proposal, including numbers, the person said.

'Huge Hit'
Christine Lagarde, managingdirector of the International Monetary Fund, said on ABC's “ThisWeek” yesterday that the unresolved situation with the debt ceilingcould mean higher interest rates, a higher burden on U.S. taxpayersand “stock markets taking a huge hit and real nasty consequencesnot just for the United States but for the entire globaleconomy.”

Boehner and the president had both been aiming for a largercompromise that would extend the debt ceiling through the nextelection in 2012. House and Senate Republicans are insisting thatspending cuts exceed any increase in the debt ceiling.

Republicans including Majority Leader Eric Cantor of Virginia, aparticipant in previous bipartisan debt talks led by Vice PresidentJoe Biden, say that group had identified between $2 trillion and$2.5 trillion in spending cuts that could serve as a framework foran agreement between Obama and congressional leaders.

Democrats, including Maryland Representative Chris Van Hollen,who participated in the Biden effort, say Democrats never agreed tothat amount without new revenue in the mix.

“What we talked about was $1.1 trillion in cuts and savings,”Van Hollen said today on “The Early Show” on CBS. “We did not getclose to $2 trillion in cuts. And again, the gap there was closingthese corporate tax loopholes.”

Doesn't Get Easier
The conflictingaccounts underscore the difficulty of reaching a speedy resolution,said Robert Bixby, executive director of the Arlington,Virginia-based Concord Coalition.

“It's not a simple matter of going back to what everybody agreedto in the Biden talks because everybody didn't agree to it,” saidBixby. “It doesn't get any easier just to get a short-termdeal.”

McConnell said yesterday on “Fox News Sunday” that he alsofavors “the biggest deal possible. We're just not going to raisetaxes in the middle of this horrible situation.”

The Labor Department reported July 8 that the unemployment ratein June unexpectedly climbed to 9.2 percent, the highest this year.Employers added 18,000 jobs, the weakest growth since September2010. Payroll growth for May also was revised downward, to25,000.

Senate Majority Leader Harry Reid, a Nevada Democrat, expressedfrustration yesterday that Republicans had repeatedly walked awayfrom the table, according to one congressional aide. Cantor leftthe Biden negotiations in a similar stalemate on taxes.

Bloomberg News

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