Taxes reason Cantor left talks, not disagreements on Pentagon spending

The deficit talks led by Vice President Biden faced a dispute over whether to include the Pentagon in any spending caps or deficit triggers, but the office of House Majority Leader Eric Cantor (R-Va.) said Friday that taxes were the only reason the talks collapsed Thursday.

“There were some disagreements on defense, but the issue is being greatly overblown to distract from Democrats' push to raise taxes,” spokesman Brad Dayspring said. “The tax issue was the sole reason the talks reached an impasse, but it's important to recognize that the group made great progress in identifying trillions of dollars in spending cuts that can serve as a blueprint for a potential compromise,” he said.

Democratic aides said the defense issue was central since it would be deeply painful to reach trillions in spending cuts solely from domestic discretionary accounts. Including war spending savings from the drawdowns in Afghanistan and Iraq would also help meet a debt-trigger requirement that the debt be declining relative to the size of the economy.

One source said the group was still waiting on exact numbers from the Pentagon before feeling out what specific cuts would be on the table.

Cantor walked out of the talks on Thursday followed by Senate Minority Whip Jon Kyl (R-Ariz.), leading to the Biden discussions being put on ice. President Obama and House Speaker John Boehner (R-Ohio) are now left to sort out the mess.

Office of Management and Budget officials and congressional Democrats have been pushing for both defense spending caps and funding cuts, said a source with knowledge of ongoing budget and debt-reduction deliberations.

"If domestic discretionary spending is going to be subjected to this, OMB is pushing hard that DOD also be," the source said Friday.

OMB officials have floated the idea of returning annual Pentagon budgets to either 2011 or 2010 levels "and flatlining them for a few years," the source said.

More House Republicans than in years past say Defense spending cuts should be on the table, but a majority of them appear to still be in favor of keeping the Department of Defense's budget immune from sizable cuts and caps.

The 2012 budget plan authored by House Budget Committee Chairman Paul Ryan (R-Wis.), for instance, called for another round of internal cost-cutting at DOD — but it embraced the $553 billion in defense spending for 2012 sought in February by the White House.

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