Democrats say both sides have agreed to at least $1 trillion-plus in cuts over a 10-year period, but the goal is to get to between $2 trillion to $2.5 trillion in cuts and revenue to cover the government through 2012.
(The $1 trillion-plus figure, according to a leadership aide, would only last about seven months before the government hits the ceiling again. Republicans want cuts that equal the amount the debt limit is raised.)
So how do they make up the difference before the Aug. 2 deadline?
Republicans want more cuts. Democrats think it can be made up with a combination of cutting tax deductions for the wealthiest Americans, subsidies (like for ethanol, corporations and oil companies), tax “loopholes” (like for corporate jets and an inventory accounting provision called “Last In, First Out,” or LIFO), and defense cuts. Democrats are targeting up to $300 billion in Defense cuts, but don’t think they will get that much.
Democrats are setting up a populist pitch -- social services for the middle class and the poor versus breaks for corporations and the rich.
"Do we perpetuate a system that allows for subsidies in revenues for oil and gas, for example, or owners of corporate private jets, and then call for cuts in things like food safety or weather services?" White House Press Secretary Carney said at today's White House briefing, for example.
Democrats often talk about raising taxes on the richest, specifically on those making $1 million a year or more -- something that is popular in polls. But the aide said that’s not likely to be part of a final debt-ceiling deal, because that would mean undoing the tax-cut deal the president struck in December. (That extended cuts for two years, which would put the expiration of those at December 2012, right after the presidential election.)
Senate Minority Leader Mitch McConnell (R-KY) will meet with President Obama in less than an hour and said in a floor speech today he will tell the president that tax increases have to be "off the table."
"I intend to ask the President what he's prepared to do, outside of raising taxes, about the massive deficits and debt that have accumulated on his watch,” he said, adding, "Move past the tax hikes and talk about what’s possible.”
He continued: "[Democrats] don't seem to understand that the voters didn't elect dozens of additional Republicans to the House of Representatives last November because they wanted their taxes raised. They sent them here to reverse policies that failed."
Speaking right before McConnell on the Senate floor this afternoon, Majority Leader Harry Reid (D-NV) offered few details about his meeting with the president at the White House. He called it "productive." He then accused Republican leadership of worrying more about politics than the economy in the deficit talks.
"I hope they'll join us to create jobs and set aside their desire to please the tea party and defeat President Obama," Reid said.
Democrats had been trying to make the case -- aimed at McConnell -- that those items (tax deductions, subsidies, and "loopholes") are not tax increases at all.
McConnell doesn’t seem to be buying it.
He also again called on the president to include cuts to entitlements, something that has proven to be politically unpopular for Republicans who backed Rep. Paul Ryan's (R-WI) controversial budget proposal that would partially privatize Medicare.
"Save our entitlements from bankruptcy," McConnell said.
Democrats think it's an issue that can help them take back the House and retain power in the Senate.
Those familiar with McConnell's thinking have said the senator has long believed that if entitlements were to be touched, both parties needed to do it together. Otherwise, the party that went first would suffer politically.
Democrats believe McConnell’s stance is purely political, that his intention is to draw Democrats into cutting Medicare to help blunt the advantage Democrats have currently on the issue. But Democrats, equally cognizant of the politics, don’t want to cede that advantage.
Highlighting the politics, the Senate's No. 2 Republican, Sen. Jon Kyl (R-AZ) – who walked out of the Vice President Biden-led debt-ceiling negotiations – also spoke on the floor in front of a sign that read: "The Obama Economic Record - He's Making it Worse" He responded to the White House proposals to raise new tax revenue through measures like ending tax breaks for oil companies.
"Leave it alone,” he said. “Just don’t touch it. … Don’t force us to raise taxes.”