Budget battle lines drawn

WASHINGTON – Battle lines in federal debt talks sharpened markedly Thursday when the Senate’s top Democrat rejected a proposal for $2 trillion in budget cuts as demanded by House Speaker John Boehner, saying any cuts must be accompanied by action on closing tax loopholes.

“You can’t do $2 trillion just in cuts,” said Senate Majority Leader Harry Reid, D-Nev., in an interview in his Capitol office. “There has to be a mix of spending cuts, including defense, there has to be a more fair apportionment of tax policy in this country.”

Republicans have resisted using tax reform to rein in deficits as Congress and the White House try to break a stalemate over raising the nation’s debt limit by Aug. 2 to avoid the nation’s first federal default. Boehner’s office reiterated Thursday that tax hikes would not be “on the table” in talks.

Reid, the Senate majority leader, said that negotiations are likely to drag until the 11th hour, a prospect certain to send shudders through the financial markets and fuel political debate.

Reid’s comments came as budget talks unfold on various fronts across Washington, and as Democrats and Republicans seek political advantage, especially among independent voters that can swing elections.

Polls show Democrats would find popular support for lifting taxes on high-income earners and for ending corporate tax breaks, a stance Republicans have resisted as they try to shrink the size of government.

The rhetoric from Reid and Boehner is reminiscent of the showdown earlier this year over a 2011 budget that almost shut down the government.

Boehner earlier this month demanded $2 trillion in budget cuts in exchange for raising the government’s debt ceiling, reductions presumably that would take place over the next decade.

“That certainly would be a big, big number,” Reid said Thursday. “But you know these are numbers that are not impossible – if you do savings with the Pentagon, in addition to domestic discretionary (accounts) and rearrange the tax stuff. That’s all doable.

“Whatever we do is going to have to, in my opinion, be substantial,” Reid said.

Most Democrats and Republicans agree that the $14.3 trillion debt limit must be raised to avoid government default on accrued obligations, even as some GOP naysayers question predictions of financial mayhem for failing to act.

With a divided Congress unlikely to approve much else this year, the unpopular debt vote provides Republicans perhaps their best opportunity to fulfill their campaign promise of extracting steep budget cuts.

Vice President Joe Biden has been brokering talks, an effort that took on added significance this week after a parallel effort by a bipartisan “gang of six” senators stumbled when one key Republican dropped out.