House and Senate negotiators have not reached a deal that would lift the nation’s debt ceiling just hours before markets in Asia are set to open ”” a test of whether Washington political dysfunction is beginning to shake the global economy.

House Republicans are not able to reach a deal with Senate Democrats, said congressional sources, though staff-level negotiations are continuing.

And in a sign that talks with Republicans appear to be going sour, Senate Majority Leader Harry Reid (D-Nev.) began to draft his own legislation Sunday that would slash at least $2.5 trillion to match an extension of the nation’s borrowing limit through the 2012 election, leadership aides said.

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There is great disagreement in Washington over the meaning of last year’s midterm elections, but it’s almost certain that most Americans did not vote for the kind of paralysis that now surrounds the negotiations over the terms of raising the debt ceiling.

Americans voted for, or got, divided government because the public doesn’t fully trust either party with the reins of power. That means the only way out of this problem is through compromise, or what one administration official called “bipartisanship by necessity,” not by choice.

Up until now, enough lawmakers haven’t been ready to accept that in order for a deal to be struck. So the clock ticks.

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This medicine is very hard for Americans to swallow, but the truth is, we can’t have it both ways. We want an arms-length relationship with the government in good times. In bad times, the cries go out to “do something,” even if it’s pay us to do nothing. We want a free-market economy during expansions, a nanny state in periods of recession. Privatized profits during the boom, socialized losses during the bust.

–Caroline Baum, in a Bloomberg News piece this week

For years now, America has been spending more money than we take in. The result is that we have too much debt on our nation’s credit card ”” debt that will ultimately weaken our economy, lead to higher interest rates for all Americans, and leave us unable to invest in things like education, or protect vital programs like Medicare.

Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem. That’s what the American people expect of us. Every day, families are figuring out how to stretch their paychecks a little further, sacrifice what they can’t afford, and budget only for what’s truly important. It’s time for Washington to do the same.

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In short, to revive jobs and the economy, the federal government needs to do the opposite of what families should do in hard times: spend more money.

It’s true that doing this would increase the deficit, and it’s true that budget deficits ultimately need to be faced. But the deficit problem is far less urgent than most elected officials are letting on. In this weak economy with high un­employment, the deficit is a long-term problem, not a short-term one. The immediate issue is unemployment””a problem that calls for spending, not austerity. Along with improving people’s lives, more jobs mean a more robust economy””which will ultimately do more to reduce the deficit than anything else will.

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President Obama and top House Republicans are deep in negotiations over a far-reaching plan to save $3 trillion over the next decade through sharp cuts in agency spending and politically painful changes to popular health and retirement programs, but without any immediate increase in taxes, Democratic congressional leaders reported Thursday.

White House officials insisted that Obama remains committed to including revenue increases in any comprehensive deficit-reduction package as the two sides seek an agreement that would also raise the federal borrowing limit in the face of a looming Aug. 2 deadline.

But congressional Democrats were furious over what they described as the latest twist in White House talks, which they said now appeared to taking an unacceptable turn.

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According to a copy of the plan, obtained by POLITICO, the group would impose a two-step legislative process that would make $500 billion worth of cuts immediately followed by a second bill to create a “fast-track process” that would propose a comprehensive bill aimed at dramatically restructuring tax and spending programs. The plan calls for changes to Social Security to move on a separate track, and establishes an elaborate procedure for considering the measures on the floor.

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It’s not that Republicans needed to tug their forelock and go along with whatever grand bargain the White House whipped up. But to win the endgame, they needed something they were willing to concede, something they could tout in public as an example of meeting the Democrats partway.

Their inability to make even symbolic concessions has turned a winning hand into a losing one. A majority of Americans want to close the deficit primarily with spending cuts ”” which is to say, they’re primed to side with conservatives in the debt-ceiling debate. But in trying to turn that “primarily” into a “completely,” the right has squandered this advantage….

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In February, President Obama submitted his budget. The CBO reported that it would steeply boost the national debt.

In April, the president released a revised deficit-reduction plan so short on detail that the CBO deemed it too vague to evaluate.

Also in April, the Senate unanimously rejected the president’s February budget. Since then, the Democratic leadership in the Senate and the White House have put forward no clear budget approach….

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…a quick, informal selection of voices from across the country over the weekend found both pessimism and cynicism about the state of negotiations in Washington, resignation about the partisan jousting and more confusion than conniption about what exactly will happen if the president and his Republican opponents cannot make a deal to raise the debt ceiling by Aug. 2.

And neither side, they say, looks good.

“They’re all boneheads,” said Steve Ruzika, 55, an entrepreneur from Boca Raton, Fla., who added that while he is politically conservative, he is fed up with both ends of the political spectrum.

“This has been brewing for a long time,” Mr. Ruzika said. “They should have solved it before now.”

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[BOB] ABERNETHY: But the common good. This idea of the common good, very important in religious and ethics. How do you define it? And who says what the common good is?

[JIM] WALLIS: Well, this week we’ve organized 5,000 pastors to say let’s look at the real people in our congregations and our communities, what’s going to happen to them as opposed to the Washington, D.C. question, who’s up who’s down, who’s going to be the Speaker of the House next time, who’ll win the next election. The common good is about the real people, the people we have to always take into account. And pastors, I think, I wanted to talk to people whose job it is to have re-read the Bible. To get to, to focus on who the real people are here.

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….Americans are skeptical with good reason and that level of distrust will not go away if all we get is another bipartisan approach to kicking the debt problem down the road. In case you have forgotten, we raised the debt ceiling as recently as February 2010.

When will we gain control of our budget? We routinely hear about trillions in spending cuts, yet we spend more and more each year. Lip service is paid to cutting back, but we all know that spending cuts never, ever happen in Washington DC.

With a slowing economy, the argument is often made that government has to step in and do something. As you can see from the list above, our government has been doing exactly that. Yet, those policies have been ineffective so far.

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The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.

“It certainly underscores the importance of passing the debt ceiling and not putting us in default status, and making sure there’s a longer term fiscal plan to contain spending and the deficit we’ve been running up over the last few years,” said Anthony Cronin, a Treasury bond trader at Societe General SA in New York, one of the 20 primary dealers that trade with the Federal Reserve. “Maybe it’s the impetus to say we’ll need more of a concession.”

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Yuck. Read it all and there is now a lot more there.

Free lunchism is ultimately the problem with the no-new-taxes pledge that so many politicians have adopted. A refusal to raise taxes, no matter how principled, cannot take us back to the good old days. It would instead lead to a very different American society. For taxes to remain where they are, Washington would need to end Medicare as we know it, end Social Security as we know it, severely shrink the military ”” or do some combination of the above.

“We cannot repeat the past when it comes to the federal budget,” Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, recently wrote. “The aging of our population and the rising cost of health care have changed the backdrop for federal budget policy in a fundamental way.”

The most important part of the recent Republican budget plan, written by Representative Paul Ryan, was that it acknowledged this reality…

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Overall, the proposal would cut Social Security benefits by $112 billion over the next decade, according to the nonpartisan Congressional Budget Office. It would cut government pensions and veterans’ benefits by $24 billion over the same time period if adopted for them.

Reaction from the president’s own party was swift Thursday, raising questions about whether Obama can keep Democrats on board if he agrees to cuts in Social Security. House Democratic leader Nancy Pelosi said her caucus won’t support any package that includes Social Security cuts.

“Do not consider Social Security a piggy bank for giving tax cuts to the wealthiest people in our country,” Pelosi said. “We are not going to balance the budget on the backs of America’s seniors.”

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It’s a sad mark of the times to have to point this out, but “averting calamity” doesn’t suffice as governing strategy. It’s not what more effective public sectors in places such as Singapore or Finland, or even China, are doing.

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[BOB] ABERNETHY: But all the moral debate has not made compromise easy.

[MICHAEL] GERSON: I think moral motivations in politics are very important. But when you claim that your own views somehow have a divine sanction, you’ve cut off all political argument. This should be an argument about outcomes, what is really best for the justice and decency of a society. I think a limited government is important to that, and I think a government that provides some of the most basic needs for the most vulnerable people in society is important to that as well. That’s where a lot of Americans are.

ABERNETHY: Alan Simpson thinks his former colleagues will head off a national crisis and that their constituents will accept the need for sacrifice.

[ALAN] SIMPSON: I think there are a lot more heroes in Congress than we recognize.

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MARK SHIELDS: On revenue.

The reality is this, that every single group, whether it’s Simpson-Bowles, whether it’s Alice Rivlin and Pete Domenici, whoever it is — semi-serious, we probably should have said — yes, there have to be budget cuts to deal with the deficit problem and the debt, but there have to be revenue increases.

It’s become a dogma with Republicans now that anybody who votes for a tax increase is no longer a member of the club or the party….

MICHAEL GERSON: I think — I think Democrats are being equally unreasonable on the issue of entitlements.

This is our long-term spending challenge. It’s not that we tax too little. It’s that we have expensive entitlement commitments, an aging population, and health care inflation that have made that portion of the budget completely unsustainable….

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Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at “nearly $100 trillion,” that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

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…here’s the question for 2012: If we the people don’t want the higher taxes that are needed to support not only ObamaCare but a growing federal government, are we willing to support the real cuts that go along with that choice? And if we decide we don’t want these programs touched, will we accept the higher taxes that go along with keeping them, including for people making a lot less than $250,000?

This is the heart of the argument shaping up between Mr. Obama and Paul Ryan, chairman of the House Budget Committee. Manifestly Mr. Obama believes that as much as Americans say they want smaller government, the moment they find one of their favorite programs (e.g., Medicare) up for consideration, they balk.

Mr. Ryan and Republicans make the opposite bet: The president’s spending has made Americans more willing to face up to these choices, especially if the alternative is higher taxes on more people.

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The problems of old age (chronic illness, outliving savings, loneliness) are real, but age by itself is not an indicator of need. The blanket defense of existing Social Security and Medicare isn’t “liberal” or “progressive.” It’s simply a political expedient with ruinous consequences. It enlarges budget deficits and forces an unfair share of adjustment ”” higher taxes, lower spending ”” on workers and other government programs. This is the morality of the ballot box.

People do not lose their obligations to the larger society by turning 65. We need to refocus these programs on their original purposes. Social Security was intended to prevent poverty, not finance recipients’ extra cable channels. Medicare provides peace of mind as well as health insurance; wealthier recipients can afford to pay more for their peace of mind. Burden-sharing needs to include the elderly. This is the crux of the budget problem.

Facing it is both a moral and financial imperative. With the 2012 election looming, major overhauls of these programs seem unlikely. Still, more modest changes (slow increases in eligibility ages, added taxation of Social Security benefits, costlier Medicare for upscale beneficiaries) could produce significant savings. If even these are absent, the meaning will be plain: Old stereotypes continue to trump new realities.

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According to my calculations based on government data, such [typical] married couples [as I cite in my example] will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation. They will receive health-care services paid for by Medicare that, on average, will total another $450,000 after inflation. The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending.

We cannot even remotely afford to make good on these promised benefits. Although our system of personal liberty, free enterprise and limited government has made us an affluent and upwardly mobile people, we are not yet a nation of [wealthy benefactor] John Beresford Tiptons.

The existence of so many million-dollar couples is not the result of elected officials carefully weighing the needs of senior citizens against the financial ability of younger workers to meet these needs. Rather, it is the result of decades of separate legislative actions by both political parties to liberalize retirement and health-care benefits, the sum total of which no one has bothered to calculate.

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Medicare, the U.S. health insurance program for the elderly and disabled, and the Social Security trust for the disabled and retirees are running out of money sooner than the government had projected.

While Medicare won’t have sufficient funds to pay full benefits starting in 2024, five years earlier than last year’s estimate, Social Security’s cash to pay full benefits runs short in 2036, a year sooner than the 2010 projection, the U.S. government said today in an annual report.

Both forecasts were affected by a slower-than-anticipated economic recovery, the government said. The estimates for funding add urgency to talks between Democrats and Republicans on ways to cut spending to reduce the U.S. budget deficit.

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The federal government will not run short of money to pay its bills on May 16, when the federal debt reaches the legal maximum of $14.3 trillion.

Even after Aug. 2, the deadline the Treasury Department set this week for Congress to lift the borrowing limit, the government might be able to delay a crisis, perhaps even for a few months, through extraordinary measures such as asset sales.

But with every passing week of stalemate over the debt ceiling, the risk increases that investors will start to fret that the United States will not pay its debts, and demand higher interest rates for loans to the federal government.

Should that happen, the cost could be vast and the damage difficult to reverse.

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[MARK SHIELDS] I mean [the Republicans] want to go after the social programs. And each time, they take this election win as a mandate to do it, and they end up…

DAVID BROOKS: Well, but I can say, on the substance, they are right each time. I mean…

JIM LEHRER: You think it is courageous to do that?

DAVID BROOKS: Well, I mean, as I said, your average Medicare enrollee, average income, making I don’t know what it is, $50,000 a year, is paying in $145,000 over the lifetime into the system, taking out $450,000.

Well, there is a big gap there. And that is unsustainable. And so the $450,000 has to be brought down over time. And they are absolutely right to try to bring it down. It just happens to be extremely unpopular to try to talk about that.

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…here’s the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%. What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

Up until now, the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12%. But cuts to that 12% alone won’t solve the problem. So any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget. A serious plan doesn’t require us to balance our budget overnight ”“ in fact, economists think that with the economy just starting to grow again, we will need a phased-in approach ”“ but it does require tough decisions and support from leaders in both parties. And above all, it will require us to choose a vision of the America we want to see five and ten and twenty years down the road.

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In reality, finding a way to raise taxes may well be the central political problem facing the United States.

As countries become richer, their citizens tend to want more public services, be it a strong military or a decent safety net in retirement. This country is no exception. Yet our political culture is an exception. It has made most tax increases, even to pay for benefits people want, unthinkable.

This is where the Bush tax cuts come in. They have created a way for inertia to be fiscally responsible.

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Put aside the cruise brochures and let the garden retain that natural look for a few more years. Demography and declining investment returns are conspiring to keep you at your desk far longer than you ever expected.

This painful truth is no longer news in the rich world, and many governments have started to deal with the ageing problem. They have announced increases in the official retirement age that attempt to hold down the costs of state pensions while encouraging workers to stay in their jobs or get on their bikes and look for new ones.

Unfortunately, the boldest plans look inadequate. Older people are going to have to stay economically active longer than governments currently envisage; and that is going to require not just governments, but also employers and workers, to behave differently.

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The Republican budget released on Tuesday is a daring one in many ways. Above all, it would replace the current Medicare with a system of private health insurance plans subsidized by the government. Whether you like or loathe that idea, it would undeniably reduce Medicare’s long-term funding gap ”” which is by far the biggest source of looming federal deficits.

Yet there is at least one big way in which the plan isn’t daring at all. It asks for a whole lot of sacrifice from everyone under the age of 55 and little from everyone 55 and over. Representative Paul Ryan, the Wisconsin Republican who wrote the plan, calls the budget deficit an “existential threat” to the United States. Then he absolves more than one-third of all adults from responsibility in dealing with that threat.

This decision doesn’t make him unique in Washington. There is nearly a bipartisan consensus that any cuts to Medicare and Social Security should spare the baby boomers and the elderly. And, certainly, retirees or people on the verge of retirement shouldn’t have their benefits changed radically. But the consensus, like Mr. Ryan’s plan, goes too far.

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