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Obama Warns He Won’t Take Short-Term Debt Fix

President Barack Obama told congressional leaders in deficit-cutting talks that he won’t sign any agreement that fails to raise the debt limit through the 2012 election, said a congressional aide familiar with the negotiations.

The president asked the leaders to come back for another meeting July 10 with detailed ideas and to be prepared for a long session, the aide said.

The White House and congressional leaders have signaled fresh openness to a broad deal that might include entitlement cuts and tax increases. Obama said he hopes the next meeting will start the “hard bargaining” necessary to reach an agreement. He called today’s meeting at the White House “very constructive.”

“People were frank,” the president told reporters after the approximately 90-minute session. “We discussed the various options available to us. Everybody reconfirmed the importance of completing our work.”

The president acknowledged the difficulty of achieving the breakthrough that has eluded him and congressional leaders in weeks of negotiating. They are seeking a deficit-slashing accord to pave the way for a vote to increase the $14.3 trillion debt limit, a move the Treasury Department says is needed by Aug. 2 to avert a default on the nation’s financial obligations.

‘Still Far Apart’

“The parties are still far apart on a wide range of issues,” Obama said. “And everybody acknowledged there’s going to be pain involved politically on all sides.”

The congressional aide said Obama asked the leaders to state their preference for the size of a deficit-cutting plan, ranging from small, at $2 trillion to $2.5 trillion; medium, at $3 trillion to $3.5 trillion, or large, at $4 trillion to $4.5 trillion. All of the congressional leaders chose either medium or large, while Obama said he wanted a large deal, the aide said.

There was no “breakthrough” at today’s session, said White House press secretary Jay Carney. Obama said White House and congressional staff aides will work through the weekend on elements of a possible accord.

Senate Minority Leader Mitch McConnell of Kentucky called the meeting “a good conversation” and wouldn’t comment further. Others who attended, including Senate Majority Leader Harry Reid, a Nevada Democrat, and Senator Jon Kyl of Arizona, the second-ranking Republican, wouldn’t comment.

Social Security

Before the meeting, the White House and Democratic leaders signaled openness to curbing the growth of entitlement programs such as Social Security through a change in the way the government measures inflation, which would cut future annual benefit increases. Republicans had said they would consider limiting certain tax breaks.

The president wants “to strengthen” Social Security without making cuts that “slash benefits,” Carney said in an e-mail earlier today. “The president has always said that while Social Security is not a major driver of the deficit, we do need to strengthen the program.”

House Speaker John Boehner of Ohio told Republicans at a private caucus before the White House meeting that he was not going “for a wimpy deal, so we’ll see,” said Republican Representative Fred Upton of Michigan, chairman of the House Energy and Commerce Committee.

‘Skeletal Outline’

Both parties understand the “skeletal outline” needed for a compromise, which can be reached if leaders have the “political will” to act, Senator Dick Durbin of Illinois, the second-ranking Democrat, said on Bloomberg Television before the meeting.

Durbin, who like most Democrats has been skeptical of an inflation-rate change that could limit the growth of entitlement programs, said Social Security changes could be discussed as long as savings are used to strengthen the retirement system.

“I’ll put Social Security on the table as long as several things are clear: Number one, any savings in Social Security goes to make Social Security stronger, longer,” Durbin said. “We’ve got to make sure the benefits structure that people really count on, those in lower and middle-income categories, are going to be protected and enhanced.”

Yesterday the House’s second-ranking Republican, Majority Leader Eric Cantor of Virginia, said he would be willing to talk about Obama’s call to limit some tax breaks, such as depreciation on corporate jets, provided any savings are used to finance other tax cuts.

‘Glad to Talk Loopholes’

“If the president wants to talk loopholes, we will be glad to talk loopholes,” Cantor told reporters in Washington yesterday. Cantor had previously said any proposal that raised taxes should be off-limits in the debt discussions, and should only be contemplated as part of a broader tax overhaul.

Cantor also expressed optimism that a “blueprint” for saving more than $2 trillion, produced in bipartisan debt-limit talks led by Vice President Joe Biden, may provide a basis for a deal.

Those talks broke down last month after Cantor and the other Republican participant, Kyl, withdrew because they refused to consider tax increases. The framework is ‘still in the works” and includes more than $400 billion in cuts to mandatory health-care spending, Cantor said.

Measuring Inflation

The White House, in the Biden-led meetings, had been willing to discuss the using the inflation-calculation change to help shrink the deficit, according to people in both parties familiar with the administration’s position who weren’t authorized to speak publicly.

Two Democratic officials with knowledge of the negotiations who briefed reporters yesterday said Social Security was among the entitlement programs that might be discussed to get to a larger deficit-reduction package.

The Senate -- which canceled a planned vacation this week to focus on the debt impasse -- engaged in some partisan posturing on the issue. The chamber voted 74-22 to advance a Democratic non-binding measure that said people earning at least $1 million a year should “make a more meaningful contribution to the deficit reduction effort.” The measure is S. 1323.

The Social Security proposal and any move to include tax increases are already sparking opposition from activists in both parties. Many Democrats, including Reid and House Democratic Leader Nancy Pelosi of California, have repeatedly said Social Security should be off the table in the debt talks.

Democratic activists expressed anger and alarm at the suggestion that a debt deal would shrink entitlement benefits.

“If President Obama supports cuts to Medicare, Medicaid or Social Security benefits, that will be a defining moment of presidential weakness -- and put all Democrats facing re- election in 2012 at risk,” Adam Green, co-founder of the Progressive Change Campaign Committee, said in a statement.

Republicans, including Boehner and McConnell, say a plan that includes more tax revenue won’t pass the Republican-run House or the Democratic-controlled Senate, where Republicans have enough votes to stall action.

To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net; Julie Hirschfeld Davis in Washington at   or Jdavis159@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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