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Off-Topic on Eve of White House Debt Talks

Key players in debt ceiling talks spent the day before a White House meeting on the topic discussing tax proposals that wouldn’t reduce the deficit, shooting down plans from their colleagues, releasing far-afield budget blueprints and trading tweets.

Overall, neither Democrats nor Republicans made much progress toward a deal as they head to a leadership meeting with President Barack Obama today.

House Majority Leader Eric Cantor said he was open to closing tax loopholes — but only with a Grover Norquist-approved catch. Cantor said any revenue from closing loopholes should go toward cutting other taxes, not shrinking the deficit.

“If the president wants to talk loopholes, we’ll be glad to talk loopholes,” the Virginia Republican said in his weekly briefing. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall. Listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”

Sen. John McCain (R-Ariz.) also endorsed the idea of including revenue-neutral tax reform in a deal in a floor speech.

That would comply with the Norquist pledge most Republicans have signed to never raise taxes; it just might not get the two parties much closer to a deal.

McCain said Republicans should “agree to certain tax increases and closing loopholes but only in return for an overall reduction of the corporate tax rate. That way, Republicans can say that we have not raised taxes overall, and the administration and the Democrats can say that they eliminated loopholes and indeed made the taxation of Americans more fair.”

But Senate Minority Leader Mitch McConnell threw some cold water on such ideas from his own party, continuing to question whether there is time to do a broader tax reform package. “To sort of cherry-pick items in the context of this current negotiation with the White House strikes me as — as pretty challenging,” the Kentucky Republican said.

And McCain and Cantor dismissed the demand by some Republicans that a balanced budget amendment pass before voting on a debt limit increase. McCain said it has no chance of passing; Cantor said he didn’t want to condition his vote on Democratic votes. A constitutional amendment would require two-thirds of both chambers and, therefore, would have to be bipartisan.

Sen. Charles Schumer, the No. 3 Democrat, said Republicans seem to be “on their heels” because of the Democratic drumbeat on loopholes. “The point isn’t to get rid of these loopholes simply to pay for new tax breaks elsewhere; it’s to do it in a way that contributes to the reduction of the debt,” the New York lawmaker said.

Cantor said the GOP is already compromising by being willing to increase the debt limit and that the votes aren’t there for a net tax increase. “There are no votes in the House for tax increases,” he said. “Whether the president looks at that as an ultimatum or not, it is what it is.”

The president, for his part, engaged in a bit of economic debate with Speaker John Boehner — at the first presidential Twitter town hall.

Staying away from the debt ceiling topic, the Ohio Republican tweeted, “After embarking on a record spending binge that left us deeper in debt, where are the jobs?”

Obama quipped that Boehner needed to “work on his typing skills” when responding to the Speaker’s tweet, but he then agreed that job creation has not picked up as quickly as it needs to.

Democrats have floated some tax cuts, too — including an extension and expansion of this year’s payroll tax cut and permanent relief for the alternative minimum tax — that could be used to offset tax increases elsewhere.

But Senate Minority Whip Jon Kyl dismissed those as items Democrats have pushed anyway, rather than GOP priorities.

The Arizona Republican also said on the Senate floor that Republicans agreed to $150 billion to $200 billion in higher revenue as part of the debt ceiling talks — but from fees and the like, not from taxes.

“It’s simply false to suggest that we haven’t been willing to talk about revenues and that all of the concessions have been on the Democratic side,” Kyl said.

One House Republican aide predicted that none of the tax breaks targeted by Democrats — for the owners of boats, racehorses and corporate jets — would be included in a final deal. The aide noted that the provisions not only would have a hard time in the House but also would likely face “substantial opposition” in the Senate, even among some Democrats.

McConnell said he continues to hope a big package can be cobbled together instead of a short-term fix.

“I hope that there will be some kind of breakthrough tomorrow. Maybe he could begin by telling us what he has in mind,” McConnell said, complaining that the president has yet to offer a proposal.

Cantor said the blueprint discussed in the debt talks led by Vice President Joseph Biden could still be revived if Democrats give up on a net tax increase.

“That deal is still in the works. I believe it is still there and that we can deliver on it,” Cantor said.

But Democrats continue to insist that revenues be on the table. House Minority Whip Steny Hoyer said Wednesday, “Everything needs to be on the table, and when I say everything, I mean everything.”

The Maryland Democrat predicted that any deal will need Democratic votes to pass the House, reminding reporters that 81 Democratic Members joined Republicans to pass the continuing resolution in March. But Hoyer said Democratic support would not come without a price.

“I’m not going to help on some draconian, do-it-my-way-or-the-highway vote, but we Democrats are prepared to cooperate in order to assure the credit-worthiness of the United States of America is not put at risk,” he said.

Senate Democrats spent their policy lunch going over a budget proposal from Senate Budget Chairman Kent Conrad (D-N.D.). But that proposal appears to be nothing more than an academic exercise, with no plans to bring it up for a vote, either in committee or on the floor.

Instead, their canceled recess appears likely to generate a grand total of two votes — a glorified attendance vote Tuesday after a plan to move to a Libya resolution collapsed — and a cloture vote to move to a nonbinding Sense of the Senate resolution calling for millionaires to help cut the deficit — without any specifics.

Senators who canceled their trips home and abroad without much to show for it seemed peeved, to say the least.

“Don’t ask me that question,” Finance Chairman Max Baucus (D-Mont.) said.

Kate Ackley and Jessica Brady contributed to this report.

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