GOP Again Rejects $4 Trillion Deal for Reducing Debt

President Barack Obama and congressional leaders remained divided in a 75-minute meeting Sunday over the size and the components of a plan to reduce long term deficits. Noting the need to work out an agreement over the next 10 days, the president and lawmakers agreed to meet again to discuss the debt-limit Monday. ABC News:

"President Obama told congressional leaders tonight that he is prepared to make the tough decisions on entitlement spending to reach a deal on raising the debt ceiling and cutting the deficit, a Democrat familiar with the negotiating process told ABC News.

But if Republicans are not willing to do the same regarding taxes, the president asked them during a meeting at the White House, what is their alternative?

Obama has scheduled a news conference for Monday morning, his second one in less than two weeks devoted primarily to the debt talks, as he looks to use the power of his office to sway public opinion.

Officials familiar with the meeting said Obama pressed the eight House and Senate leaders Sunday evening to continue aiming for a massive $4 trillion deal for reducing the debt. However Republicans appeared to be disinterested for such an ambitious plan and the political price it would require to pass in Congress. Instead, House Speaker John Boehner told the group that a smaller package of about $2 trillion to $2.4 trillion was more realistic.

Republicans have demanded that any plan to raise the debt limit be coupled with massive spending cuts to lighten the burden of government on the struggling economy. A Democratic official familiar with the session said House Majority Leader Eric Cantor, R-Va., was especially adamant that any deficit reduction package could not contain tax increases and that any new tax revenue would have to be used to pay for other tax benefits. Higher taxes, Republicans have said from the start, are deal-killers if not offset elsewhere. Many Democrats on the other hand are unnerved by the president's $4 trillion proposal because of its changes to Medicare and Medicaid.

Officials familiar with the meeting spoke on the condition of anonymity because of the delicate nature of the negotiations. Officials said Obama time and again pressed for a larger package. He also pointed out that the smaller deal of up to $2.4 trillion still would require tax revenues and that not all of the details had yet been worked out.

In frustration over how Sunday's meeting played out, one Democratic official said of Republicans "if they want to walk away from a historic opportunity to reduce the deficit, that's their choice, but it does expose them in a pretty big way."

Earlier, White House Chief of Staff Bill Daley said in a television interview that Obama would not "walk away from a tough fight."

"We're going to try to get the biggest deal possible," said Treasury Secretary Timothy Geithner in another interview.

Senate GOP leader Mitch McConnell of Kentucky said Saturday that the $4 trillion deal raising taxes amid 9.2 percent unemployment,  "is a terrible idea. It's a job killer."

Lawmakers said that previous bipartisan talks, led by Vice President Joe Biden, identified a fraction of cuts that would be needed even for the more modest packages. Boehner insisted the smaller proposals had more realistic chances of passing.

"I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase," Boehner said.

The package of $2 trillion to $2.4 trillion in deficit reduction identified by the Biden-led negotiators would still require Republicans to accept some increase in tax revenue. Republicans walked out of those negotiations after they were unable to accept about $400 billion in new tax money that the White House proposed by closing loopholes, ending some corporate subsidies, and limiting the value of deductions for wealthy taxpayers.

One option now under consideration by Obama administration officials would call for capping some deductions for wealthy taxpayers at the 28 percent tax rate and using the revenue to help pay for a yearlong extension of a current payroll tax cut. The extension would expire at the end of 2012, but the cap on deductions would continue, generating new revenue in the long term. Capping all itemized deductions at the 28 percent rate would generate about $293 billion over 10 years.

Time is becoming increasing precious in the negotiations. The deficit reduction talks are linked to the government's need to increase its borrowing limit, now capped at $14.3 trillion. The Obama administration says if the debt ceiling is not raised by Aug. 2, the nation would default on its obligations, with potentially calamitous financial consequences worldwide.

The International Monetary Fund's new chief, Christine Lagarde, said that if the U.S. fails to raise its debt limit, she foresees "interest hikes, stock markets taking a huge hit and real nasty consequences" for the American and global economies.

Daley said that the President is calling on lawmakers to "step up and be leaders."

Daley was on ABC's "This Week," as was Lagarde. McConnell appeared on "Fox News Sunday" and Geithner was interviewed on NBC's "Meet the Press" and CBS' "Face the Nation."

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The Associated Press contributed to this article.