July 21st, 2011
06:30 PM ET

Possible deficit reduction deal emerging, sources say

Washington (CNN) - President Barack Obama is continuing to pursue the most "significant deficit reduction package possible," White House Press Secretary Jay Carney said Thursday, the latest indication officials are keeping a variety of options open while trying to hammer out an agreement to raise the nation's debt ceiling and avoid an unprecedented default.

The president and Vice President Joe Biden met Thursday afternoon with Democratic leaders from the House and Senate as sources indicated the negotiations were focusing on a deal to cut $3 trillion in federal deficits over the next 10 years that would be accompanied by a debt ceiling increase.

According to the congressional aides who spoke on condition of not being identified, the possible deal remains in limbo over a disagreement on whether to extend Bush-era tax cuts for families earning more than $250,000 a year. Nothing has been agreed to yet, they noted.

The possible deal would include spending cuts expected to total $1 trillion or more agreed to in earlier negotiations led by Vice President Joe Biden, the sources said. It also would reform entitlement programs by changing the eligibility age for Medicare over time, and using a more restrictive inflation index for Social Security benefits, according to the sources.

On taxes, it would permanently extend the Bush tax cuts for families earning less than $250,000 while allowing the cuts to expire at the end of 2012 for those with income above that, the aides said. At the same time, the deal would include a commitment to reform the tax code next year, which is expected to lower all tax rates and eliminate loopholes and subsidies, the sources said.

However, House Speaker John Boehner, R-Ohio, wants the deal to make all of the Bush tax cuts permanent while keeping the commitment to tax reform, the sources said. Republicans oppose any tax hikes, and their resistance has been a major obstacle to any deal in the negotiations so far.

Some sources said the deal would work in two stages, with spending cuts and a debt ceiling increase occurring right away while entitlement reforms and tax reforms would occur later.

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soundoff (3 Responses)
  1. Tom Richards, MASS moderate

    Most importantly, we must change the mindset of leaders to rip-off and keep, exporting JOBS and capital in the process, by expiring the Bush tax cuts on incomes of over $250k, NOW!

    July 21, 2011 at 10:20 pm |
  2. Jean Murphy

    Obama has yet to put a budget on paper. He has no clue on how to actually make a budget. He sounds like a parrot. Nothing he says is real. Lies. And CNN only reports some facts & not all. Backing a phony & a liar isn't good for ratings. How pathetic that you play better with the liars of main stream media.

    July 21, 2011 at 10:05 pm |
  3. Saveena McLean

    This is indeed a sad time because we live in a beautiful country. I cannot see why our government have such a difficult time with the deficit. Frankly I am still hung on reading about cuts on Social Security and Medicare because every time someone cuts a paycheck, money goes towards medicare and social security. Why would the government cut these benefits when funds are going towards these two accounts by employees daily?

    July 21, 2011 at 9:58 pm |