Boehner cuts off debt talks with Obama

House Republican leaders have called off negotiations with the White House over a broad deficit reduction deal tied to an increase in the federal debt limit and will instead begin talks with Senate leaders to avert a government default on Aug. 2, Speaker John Boehner (R-Ohio) announced Friday.

Boehner told House Republicans in a letter that President Obama is “adamant” about raising taxes and would not agree to “fundamental changes” to entitlement programs.

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“For these reasons, I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward,” Boehner wrote in the “Dear Colleague” letter.

The decision set off a round of bitter recriminations between Boehner and Obama, and it forces congressional leaders to scramble for a last-minute agreement to raise the $14.3 trillion debt ceiling in the next 10 days.

Obama denounced Boehner and Republicans from the White House briefing room minutes after Boehner's announcement became public, and the president called congressional leaders to the White House for a Saturday meeting at 11 a.m.

Boehner said he would attend the meeting, despite writing in his letter that he was ending talks with the White House. 

The president said Boehner had abandoned “an extraordinarily fair deal.”

"It is hard to understand why Speaker Boehner would walk away from this deal," Obama said.

Displaying as much public frustration as he has ever showed during two-and-a-half years in the White House, Obama complained that Boehner would not return his call on Friday and ridiculed the Speaker, and his conservative conference, as unwilling to compromise.

Boehner’s move is the second time in a month that he has walked away from negotiations with Obama over a grand bargain on the debt.

"I've been left at the altar now a couple of times" by Boehner, Obama said. "The question is: What can you say yes to?"

In his own subsequent press conference from the Capitol, Boehner said the White House had “moved the goalposts” in a dispute over new tax revenues.

“There was an agreement with the White House at $800 billion in revenue. It’s the president who walked away from his agreement and demanded more money at the last minute,” he said.

Boehner timed his move to become public at 6 p.m., after the close of U.S. financial markets. Aides said the Speaker would need to present a revised budget plan to his conference on Monday to allow time to review and send it to the Senate. 

The president also suggested that congressional leaders would have to demonstrate to the markets that they were serious about avoiding a default.

Obama deepened a line in the sand he had previously drawn, saying again he would not accept a short-term increase in the debt ceiling that did not go beyond the 2012 elections.

"They are going to have to explain how we are going to avoid default,” Obama said of the congressional leaders. "We have now run out of time."

Boehner said he was still committed to his long-held conditions for raising the debt limit: that spending cuts exceed the amount of borrowing authority and that there be no tax increases. That could mean that a fallback plan hatched by Senate Republican Leader Mitch McConnell (Ky.), which includes no required spending cuts, would need to be altered to pass the House.

In a briefing for reporters, two House Republican leadership aides said the broad deal being discussed would have brought $3 to $3.5 trillion in spending cuts over 10 years but began to fall apart after the Senate’s Gang of Six released their deficit reduction proposal on Tuesday.

House Majority Leader Eric Cantor (R-Va.) said GOP leaders left the White House talks because Democrats would not budge on including tax increases in a debt deal.

"Unfortunately, time and again these talks have reached an impasse for one reason: the Democrats’ insistence on raising taxes on small businesses and working families. We must get Washington’s fiscal house in order, but with millions of Americans out of work, the worst thing Washington can do is to raise taxes on those we need to start hiring again," Cantor said in a statement.

Obama presented a starkly different version of events from one offered by Republicans. 

The president said the new tax revenues he had asked for were lower than the Gang of Six plan and more in line with GOP goals.

Republican officials, who offered their account on the condition of anonymity, said Boehner and Cantor asked White House chief of staff Bill Daley and Treasury Secretary Tim Geithner to come to the Capitol for a meeting on July 15.

At that meeting, the House GOP leaders presented a framework for a grand bargain that would initiate a two-step process. Under their proposal, Congress would pass an increase in the debt limit before Aug. 2 along with a cap on discretionary spending. That legislation would also have set up a process for congressional action over the next several months on entitlement and tax reforms and would have authorized an increase in the debt limit roughly through February.

The White House balked at the short-term nature of the debt limit increase, insisting on Obama’s demand that Congress allow the Treasury to borrow funds through the 2012 elections.

Instead, the administration proposed a long-term increase in the debt ceiling along with a failsafe to ensure Congress acted on entitlements and taxes despite the pressures of an election year. The administration proposal called for decoupling the George W. Bush-era tax rates, thereby allowing the high-income rates to expire, which Republicans have long opposed, while allowing lower-income rates to remain. On the Democratic side, the failsafe would have initiated automatic cuts in Medicare and Medicaid if Congress did not act.

Boehner and Cantor opposed the Democratic trigger mechanism and proposed that if Congress failed to act, the individual mandate in Obama’s signature healthcare law would be repealed.

“We were insisting that there had to something in there from the Affordable Care Act. We specifically requested that they repeal the individual mandate,” a House GOP aide said. That would “make the politics of it even. The politics would be bad for both sides. That was the concept we were striving for.”

Obama “had not conceded on that,” the aide said. In a separate briefing, White House officials confirmed that they balked at the possibility of scrapping the requirement that all Americans buy health insurance.

Republicans disputed Obama’s account of the disagreement over taxes. The GOP official said Obama had agreed to a ceiling of $800 billion in new revenues over a decade before the Gang of Six released its plan. 

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The administration also agreed to Republican “principles” for tax reform, according to the Republican aides. Those included the creation of three individual rates with the top rate lower than the current 35 percent for Americans earning more than $250,000 a year. The Republicans also wanted – and aides said Geithner had agreed – to make the new top rate close to the level of the new corporate rate, which Republicans want to reduce to 25 percent.

Republicans contend Obama “moved the goal posts” after the Gang plan was released and insisted on $400 billion in additional revenues and that the revenue figure be a minimum, and not a maximum.

The new administration demand coincided with an uproar from Senate Democrats, who complained on Thursday about being shut out from the talks and worried that Obama would agree to a deal that did not contain sufficient revenue increases.

In his 30-minute press conference, Obama put the onus on Republicans - and in particular, on Boehner - to corral his restive conference.

"At some point, I think if you want to be a leader, then you got to lead," the president said as he departed the podium.

Erik Wasson and Bob Cusack contributed.

This story was posted at 6 p.m. and last updated at 9:20 p.m.

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