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GOP eyes cuts in military spending; Obama, Senate leaders to meet about U.S. debt

As President Obama prepares to meet today with Senate leaders to try to restart talks about the swollen national debt, some Republicans see a potential path to compromise: significant cuts in military spending.

Senior GOP lawmakers and leadership aides said it would be far easier to build support for a debt-reduction package that cuts the Pentagon budget -- a key Democratic demand -- than one that raises revenue by tinkering with the tax code. Last week, Republicans walked out of talks led by Vice President Biden, insisting that the White House take tax increases off the table.

In listening sessions with their rank and file, House Republican leaders said they have found a surprising willingness to consider defense cuts that would have been unthinkable five years ago, when they last controlled the House of Representatives. While the sessions have sparked heated debate on many issues, Rep. Peter Roskam, R-Ill., the deputy GOP whip, said there are few lawmakers left who view the Pentagon budget as sacrosanct.

"When we say everything is on the table, that's what we mean," said House Majority Whip Kevin McCarthy, R-Calif., the No. 3 leader who has been hosting the listening sessions in his Capitol offices.

Outgoing Secretary of Defense Robert Gates has advocated for some cuts -- especially related to costly new military hardware -- but has also warned of the consequences of deep or across-the-board reductions that could jeopardize American military strength in the future.

With the clock ticking toward an Aug. 2 deadline, defense spending has been a major stumbling block in negotiations between the two parties. While both sides view the tax issue as the biggest hurdle, negotiators spent much of their final three-hour session bickering over agency spending before Republicans declared an impasse Thursday, according to people familiar with the talks.

The White House has offered nearly $1 trillion in cuts to domestic agencies over the next decade and another $300 billion from security agencies. But House Majority Leader Eric Cantor, R-Va., pressed for as much as $1.7 trillion in cuts. And he wanted an overall cap on spending that would leave the door open to slashing the entire sum from domestic programs -- such as education, food safety, health research and criminal justice -- when lawmakers draft spending bills next spring.

"Everything is on the table," Cantor said in an interview afterward. But the decision on how much to cut defense "belongs in the appropriations process."

White House Budget Director Jack Lew objected, and the meeting grew heated. Democrats said they could never support a package that targets only social programs and extracts no pain from the military, big business or the wealthy.

"To get anything through the House, you're going to need some Democratic votes. This isn't a one-way street here," said a senior administration official, speaking on condition of anonymity to discuss the closed-door sessions. "It's clear that any package is going to have to have significant spending reductions, including in Pentagon spending."

The official said the package must also "have some of these tax deductions closed," referring to perks in the tax code that benefit the oil and gas industry, hedge fund managers and jet-setting corporate executives. But if Republicans agree to significant Pentagon cuts, the White House would find it easier to accept a deal that includes less in new revenue, people familiar with the talks said.

The GOP has not been entirely closed to tax changes, according to people in both parties. They mentioned a proposal to adjust the way business inventory is taxed, which could generate as much as $70 billion over the next decade, as one potential area of compromise. Another $60 billion could be generated by wiping out subsidies for ethanol blenders. A similar proposal passed the Senate two weeks ago with overwhelming Republican support.

The White House may be more interested in such a deal than congressional Democrats, who have been adamant about raising taxes on the wealthy.

"Make no mistake, there needs to be revenues in any deal," Sen. Charles E. Schumer, D-N.Y., said in a conference call with reporters Friday. "Republicans cannot insist on protecting tax breaks for millionaires at the expense of our economy."

Still, some Democrats said they place a higher priority on defense cuts.

"Defense spending is damaging spending. Many of us believe it does more harm than good to our people, and to our reputation in the world," said Rep. Barney Frank, D-Mass. "If we can get $100 billion from reducing unneeded military spending, that's better than $100 billion in taxation."

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