President Barack Obama pushed back against Republican efforts tofocus on a scaled-down deficit deal, arguing for a broader packageof spending cuts and tax increases to put the U.S. on a sounderlong-term fiscal footing.

“Now is the time to deal with these issues,” Obama said at aWhite House news conference yesterday before resuming talks withcongressional leaders on reducing deficits and raising the $14.3trillion U.S. debt ceiling before the government exhausts itsborrowing authority on Aug. 2. “If not now, when?”

In the negotiating session, Obama rejected a Republicanpresentation on spending cuts discussed in earlier talks led byVice President Joe Biden, a Democratic official said. Obama saidthe total — which a Democratic official put at $1.7 trillion — fellshort of his $4 trillion goal and the threshold Republicans set fora debt-limit increase large enough to carry the nation through the2012 elections, another Democrat said.

House Speaker John Boehner, who Republican aides said engaged ina testy exchange with Obama at the talks, set the stage for thenegotiations with his own news conference, declaring his party wasfirmly opposed to tax increases.

“The American people will not accept and the House cannot pass abill that raises taxes on job creators,” Boehner, an OhioRepublican, told reporters on Capitol Hill before departing for theWhite House for yesterday's talks. Negotiators are scheduled tomeet again at 3:45 p.m. today.

Futures Decline
Futures on the Standard& Poor's 500 Index lost 0.4 percent to 1,312.80 at 8:01 a.m. inNew York. Ten-year U.S. Treasury yields fell as much as 11 basispoints, or 0.11 percentage point, to 2.81 percent, the lowest sinceDec. 1, before trading at 2.90 percent at 8:26 a.m. in New York,according to Bloomberg Bond Trader prices.

The parties are divided over taxes and entitlement programs asthey race to meet the deadline early next month. In addition torebuffing Democratic calls for more tax revenue, the Republicansare pushing to cut programs such as Medicare and Social Security.The White House has indicated a willingness to consider savingsincluding an increase in the Medicare-eligibility age as part of alarger deal.

Republicans have demanded at least a dollar in spending cutsover 10 years for every dollar they agree to raise the debt limit,which would have to go up more than $2 trillion to get through theelections. The Republicans last weekend lowered their objective fordeficit reduction to the range of $2 trillion to $2.5 trillion.

Contingent Cuts
Democratic congressionalleaders also objected to the figure presented yesterday byRepublicans, saying spending cuts that had been discussed in theBiden-led talks were contingent on tax-revenue increases, said aDemocratic official.

Three Republican aides said that at one point in the 90-minutetalks Obama and Boehner sparred over the price that RepublicanHouse members would pay to reach a deficit deal, with the speakerarguing that supporting entitlement cuts was just as risky for hisparty. When Obama reminded him that Republicans already voted tocut Medicare spending earlier this year, Boehner retorted that hisparty was the one showing leadership.

Before the negotiating session began, Obama argued at his newsconference that negotiators should pursue his $4 trillion goal indeficit reduction, which would require both entitlement cuts andrevenue increases. He said he wouldn't agree to a short-termextension of the debt limit.

No Short-Term Extension
“I will not sign a30-day or a 60-day or a 90-day extension — that is just not anacceptable approach,” Obama told reporters.

As the elections get closer, partisan differences will only growharder to resolve, he said. “We might as well do it now — pull offthe Band-Aid, eat our peas.”

Obama called on Republican leaders to show flexibility, sayinghe has “bent over backwards” to accommodate them in deficittalks.

“I don't see a path to a deal if they don't budge. Period,”Obama said.

He chided Republican leaders for focusing on a smaller packageof cuts, saying that posture doesn't square with their rhetoricthat casts debt reduction as “a moral imperative.”

House Majority Leader Eric Cantor said Republicans “didn't comehere to raise taxes” after Obama challenged the party to compromiseon a deficit plan. Any deal “has got to be revenue neutral,” Cantorsaid, meaning it would not result in higher income for thegovernment.

$1 Trillion
“Barack Obama wants to raisetaxes and Republicans don't,” Cantor of Virginia told reporters inWashington. He said Obama sought $1 trillion in tax increases.

A Republican congressional aide said one purpose the party'sleaders had in the negotiating session was to gauge Democrats'willingness to go through with spending cuts discussed during theBiden talks if tax revenue increases were removed from thetable.

In the White House press conference, Obama said he would bewilling to include savings in Social Security as part of a grandbargain. Still, if changes to the retirement program are includedin a bipartisan deal, Obama said they should only be aimed atstrengthening the system rather than reducing the deficit.

'Do It Now'
“Social Security, if it ispart of a package, would be an issue of, how do we make sure SocialSecurity extends its life and is strengthened?” Obama said. Thereason to address the retirement system during current bipartisantalks, Obama said, is that “if you're going to take a bunch oftough votes, you might as well do it now.”

During the Biden talks, the White House had shown a willingnessto consider changes in Medicare coverage, including a phased-inincrease in the eligibility age, higher premiums and limits tocoverage of out-of-pocket expenses by other insurance plans, saidDemocratic and Republican officials.

The White House isn't seeking any tax increase before 2013,Obama said. The increases he wants would target “millionaires andbillionaires” and “corporate loopholes,” Obama said.

Democratic officials have said Obama is aiming at tax breaks forcorporate jets, oil and gas subsidies, carried-interest income ofhedge fund managers and “last-in, first-out” inventoryaccounting.

Bloomberg News