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Republicans leave talks on raising debt ceiling, cutting deficit

Republicans on Thursday pulled out of bipartisan talks aimed at finding a way to raise the federal debt ceiling and cut trillions of dollars from future federal budget deficits, triggering fresh fears of deadlock that could roil financial markets and kick the economy back into recession.

House Majority Leader Eric Cantor, R-Va., and Senate Minority Whip Jon Kyl, R-Ariz., said they wouldn't participate further because Democrats were pushing for higher taxes in any agreement.

The Republicans' withdrawal from the 7-week-old negotiations, headed by Vice President Biden, staggered but didn't doom prospects for a deal.

"I believe that we have identified trillions in spending cuts, and to date we have established a blueprint that could institute the fiscal reforms needed to start getting our fiscal house in order," Cantor said. "Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue."

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke have warned that failing to increase the nation's debt ceiling by Aug. 2 risks a U.S. default on its debts, which could convulse financial markets and lead to renewed recession.

It's likely that President Obama and House Speaker John A. Boehner, R-Ohio, will become more personally involved in crafting a plan to raise the nation's $14.3 trillion debt limit by the day that the government's borrowing authority is expected to run out, while dramatically cutting deficits.

"The goal of these talks was to report our findings back to our respective leaders," Biden said Thursday.

"The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support. For now the talks are in abeyance as we await that guidance. We stand ready to meet again as necessary."

"I think it's in the hands of the speaker and the president and, sadly, probably, me," said Senate Majority Leader Harry Reid, D-Nev.

First they will have to overcome, or at least finesse, Republican rejection of any tax increases. Whether the GOP walkout is a short-term negotiating tactic or an unyielding commitment against compromise is difficult to say at this stage; but with Democrats in charge of the White House and Senate, and Republicans at the helm of the House of Representatives, refusal to compromise dictates deadlock -- and probably default.

"They really are playing with fire here. I don't know where it ends," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group. "It makes it much harder to reach an agreement by Aug. 2, and it makes default much more likely in some form or another."

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