Biden and the six lawmakers involved in the talks –Cantor, Kyl and four Democrats — had hoped to reach the broad outlines of a plan by today. The decision by Cantor and Kyl followed a contentious session a day earlier during which Democrats pressed Republicans to agree to tax increases, according to an aide familiar with the talks.

Republicans have accused Obama for weeks of failing to lead on the debt issue.

"If we are going to meet the president's timetable to come to an agreement at the end of this month," Obama "has to engage," Boehner, an Ohio Republican, told reporters yesterday. "I would expect to hear from him."

Trillions of Dollars
"I'm prepared to bring down our deficit by trillions of dollars," Obama said last night at a Democratic fundraiser in New York City.

White House spokesman Jay Carney said the president "supports a balanced approach," not one that provides for a "tax cut for millionaires and billionaires paid for by a $6,000-a-year hike in expenses and costs for seniors."

 Republicans seek to cut spending on entitlement programs such as Medicare and Medicaid and insist on no tax increases. Democrats want to eliminate tax breaks for corporations including oil and gas companies, according to Representative Chris Van Hollen, a Democratic participant in the group.

The Treasury Department has said the U.S. risks defaulting on its debts starting Aug. 2 without an increase in the debt ceiling, a threat underscored by warnings from Moody's Investors Service and Standard & Poor's that they may consider downgrading the U.S. credit rating.

 
'Closer and Closer'
"As it gets closer and closer, you're talking about simply a debt-ceiling solution, not a deficit and debt solution," said Bill Frenzel, a Republican former member of the House Budget Committee and scholar at the Brookings Institution in Washington. "Instead of making the $4 trillion or $5 trillion arrangement they need to make to stabilize the debt in a decade, they'll probably do something to coast them through the end of the year or perhaps through the election."

The U.S. debt risks exceeding the size of the entire U.S. economy by 2021, according to the nonpartisan Congressional Budget Office.

A handoff to the White House will force Obama to get specific about what kinds of tax increases he supports to help close the budget deficit, something Democrats have avoided amid tension in their party over raising tax rates versus closing tax loopholes for corporations.

It also puts a squeeze on Boehner, who would have to find enough Republican votes to pass a possible deal that might draw opposition from much of his caucus. 

Twisting Arms
"It's going to involve twisting a lot of arms and calling in favors," said Paul Weinstein, a former White House official and senior adviser to Obama's fiscal commission. "It's not pretty for either side."

Since April 2010, when Obama's fiscal commission began meeting, lawmakers have been trying to reach a so-called grand bargain to cut trillions of dollars over the next decade.

The president's debt commission failed in December to get enough votes to forward its plan to Congress for a vote. Last month, a bipartisan Senate budget negotiating group known as the Gang of Six fell apart when Republican Senator Tom Coburn of Oklahoma quit.

Senate Majority Leader Harry Reid, a Nevada Democrat, said it appeared that Republicans were "giving up" on the Biden-led talks, held periodically since May 5.

"We're beyond gangs of five and gangs of sixes," Reid said. "It's in the hands of the speaker and the president and sadly, probably me."

Foundation for Agreement
Cantor's spokesman, Brad Dayspring, said the lawmaker notified Biden of his decision before publicly announcing it. Because the talks had made progress in identifying at least $2 trillion in cuts, "Eric is convinced there is a foundation for an agreement," Dayspring said.

Before the breakup, the two sides had identified some areas of common ground, with negotiators focused on savings from cuts in discretionary spending and areas like federal employee pensions and tightening interest deferrals for student loans, according to congressional aides.

"The Democrats continue to insist that any deal must include tax increases," Cantor, a Virginia Republican, said in a statement yesterday announcing his decision. "There is not support in the House for a tax increase."

House Minority Leader Nancy Pelosi, a California Democrat, said at her weekly news conference that her party wants to end tax subsidies for oil companies and corporations that send jobs overseas.

"I don't know that that's a reason to walk away from the table when we're trying to find a balanced approach," she said.

www.bloomberg.com