House Speaker John Boehner (R-OH) conducts his weekly news conference at the U.S. Capitol, on July 21, 2011 in Washington, DC.Getty Images/Mark Wilson
A possible deal was on the table to save the United States from an unprecedented debt default, congressional aides said on Thursday as Republicans came under mounting pressure to make concessions.
Two senior Democratic congressional aides said President Barack Obama and the top Republican in Congress, John Boehner, were working on a deal that would include $3 trillion in spending cuts over 10 years but leave tax reform for later.
Mr. Obama, in an interview with National Public Radio, said any deal must include some tax increases alongside defense and other spending cuts.
"We're also going to have to have more revenues and we can do that in a way that is not hurting the economy (and) in fact could potentially help the economy by closing up some loopholes that distort the economy," Mr. Obama said in excerpts of the interview released by NPR.
While they could leave comprehensive tax reform for later, Mr. Obama and Congress could agree to revenue increases that would end some select tax breaks, such as special breaks enjoyed by ethanol blenders, some Wall Street investors and companies that operate corporate jets.
There were other signs of progress as White House and congressional leaders worked furiously to craft a deficit reduction deal that would clear the way for Congress to raise the $14.3 trillion debt limit before the United States runs out of money to pay all its bills on Aug. 2.
While many remained focused on a long-term deficit reduction deal, aides and some lawmakers suggested negotiators were coalescing around a short-term extension of the debt ceiling. It would include a $500 billion up-front deficit cut and a commitment to a more substantial, long-term solution to America's fiscal woes.
FLUID PARAMETERS
Congressional aides said the parameters of any potential agreement remained fluid.
"I think the leaders in the White House and both political parties are trying to find a solution here," Representative Chris Van Hollen, one of the Democrats at the table in a previous round of talks, said on MSNBC. "The focus remains ... on trying to get a grand bargain."
The White House, which had initially set a July 22 target for a deal to be made so it had time to get through Congress, said there was growing momentum toward a comprehensive plan that would include both spending cuts and tax increases.
The prospect of a potential deal boosted markets that have become increasingly edgy as the Aug. 2 deadline looms.
If Congress fails to raise the debt ceiling in time, the United States would default on its obligations, possibly plunging the country back into recession and sparking a crisis in financial markets worldwide.
House Republicans remained the key hurdle to a deal, and drama was unfolding within their ranks over whether they had been given a loophole in their "no tax" pledge that could allow them to support a long-term deficit reduction deal.
Mr. Boehner said he had warned Republicans they would have to accept some compromise, and he believed most would do so.
"At the end of the day, we have a responsibility to act," Mr. Boehner told reporters.
Grover Norquist, founder of Americans for Tax Reform and author of a "no tax" pledge most Republican lawmakers have signed, gave conservatives a potential out on that promise.
In comments to the Washington Post editorial board, Mr. Norquist said allowing the George W. Bush-era tax cuts on personal income to expire would not constitute a violation of the pledge. He later told MSNBC he would oppose any change to those taxes but that there were ways to technically not violate the pledge.
Adding pressure on Republicans, officials from one of the three big credit rating agencies, S&P, were meeting with first-term Republican lawmakers on Capitol Hill.