The House Republican Conference went to the White House on Wednesday to meet with President Obama. The conversation about the U.S. debt limit was described as "very frank," which is usually Washington code for frosty.
The meeting came just a day after the House voted overwhelmingly not to raise the nation's debt ceiling. And unless that changes by Aug. 2, the U.S. will not be able to pay its debts and could default for the first time in history.
In order to win over some Republican votes, the White House is trying to negotiate a deficit reduction package.
'This Is The Moment'
On Wednesday, House Republicans went to 1600 Pennsylvania Ave. in a caravan of big blue buses. After their 70-minute, closed-door meeting with the president — a meeting that some of them described as chilly — the Republicans emerged into the sweltering heat.
House Speaker John Boehner said the meeting provided an opportunity for Republicans to tell the president their ideas "about how we solve the debt problem that's facing our country."
"I told the president, one more time, this is the moment," Boehner said. "This is the window of opportunity where we can deal with this on our terms. We can work together and solve this problem. We know what the problems are — let's not kick the can down the road one more time."
President Obama could have said the same thing — and he has, many times. But although both parties do agree on the problem, they don't agree on the solution.
"The president talked about a need for us to continue to quote-unquote invest from Washington's standpoint. And to a lot of us, that's code for more Washington spending — something that we can't afford right now," said House Majority Leader Eric Cantor.
The Republicans repeated their long-held positions in the debt ceiling talks: cut spending by $2 trillion over 10 years; no tax increases; and they want the president to agree to significant reforms in Medicare, the biggest driver of the deficit.
Democrats say they're open to some changes to Medicare, but not unless Republicans agree to more revenues — either tax hikes or a limit to tax loopholes.
While it sounds like the two parties are at the same old standstill, White House press secretary Jay Carney decided to put the best possible spin on the meeting between the president and his Republican adversaries.
"This is part of a process that's very productive and helps reduce, I think, some of the confrontational atmosphere that surrounds some of these discussions," he said. "That doesn't mean that we don't disagree on some fundamental issues — of course we do. And we've been very clear, and we haven't papered over our differences, and neither have they."
Not Much Room For Compromise
Both sides have been reassuring the financial markets that the debt ceiling will be raised. But the White House and the Republicans are still far from a deal that would allow that to happen. Budget expert Stan Collender says the Republicans in particular don't have much room for compromise.
"Because of the Tea Party folks," he says, "they cannot possibly agree to an increase in the debt ceiling, no matter what it includes, until the very last minute, so it looks like they've driven the hardest possible bargain."
If Republicans agree to a deal too early, it may look like they left something on the table, says Collender. He thinks the markets may have to react to give the two sides an incentive to come together.
"In some respects, that's what they need politically," he says. "That is, members of Congress who want to vote, would like to vote for the debt ceiling, need some excuse to be able to do that. And a market being spooked would allow them."
The Treasury says the U.S. will default if Congress and the White House don't reach agreement by Aug. 2. Collender predicts the markets will start getting nervous if there's no deal by around the third week of July.
Investors could stop buying U.S. debt — and while that might help scare negotiators out of their stalemate, it could also spark a rise in interest rates that might not be easy to reverse. And that would raise U.S. borrowing costs and make it even harder to reduce the debt.
So the talks continue. On Thursday, it's the House Democrats' turn to meet with the president.