Washington Political leaders retreated to hard-line positions Sunday after talks to reach a comprehensive deficit reduction deal sought by President Barack Obama effectively broke down over Republican resistance to tax increases.

Obama and congressional leaders will meet Sunday night to continue their negotiations on an agreement intended to bring Republican support for raising the federal debt ceiling ahead of an August 2 deadline for the government to begin defaulting on its obligations.

However, House Speaker John Boehner said Saturday that the insistence by Obama and Democrats on raising revenue through higher taxes prevented any chance that Republicans could support a major deal that also would cut spending and reform entitlement programs such as Medicare.

The White House immediately pushed back, with a senior administration official saying Boehner, R-Ohio, initially accepted the need increase tax rates on wealthy Americans as part of a deal, but then Republicans offered a different plan in the talks with Obama that began Thursday.

Perils of a "grand bargain"

On Sunday talk shows, party leaders fell back on time-tested talking points to maintain their hard-line stances.

"What is really appalling is to see our Republican colleagues essentially providing a form of extortion -- if you don't agree to deficit reduction the way we want it, we'll put all the jobs at risk, because we will allow the United States to default on its debt," said Rep. Chris Van Hollen, D-Maryland, on the CNN show "State of the Union." "That's irresponsible."

Senate Minority Leader Mitch McConnell, R-Kentucky, told "Fox News Sunday" that Republicans want to shrink the size of government and see the need to raise the federal debt ceiling as an opportunity to make that happen.

"We don't want to use this opportunity presented by the president's request of us to raise the debt ceiling to kind of freeze in perpetuity this much government," McConnell said. "I don't think the American people want it and I don't think its good for the economy."

In his statement Saturday, Boehner said parameters of the negotiations would be scaled back from what the Obama administration had requested. He indicated the focus would be on spending cuts already discussed in previous talks led by Vice President Joe Biden.

"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes," Boehner said. "I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of the debt limit increase."

Boehner phoned Obama before issuing his statement Saturday, sources said.

Gergen: Obama deal on debt ceiling could hurt Dems

A Republican source familiar with the talks told CNN that they broke down after the White House resisted proposals Boehner had offered. The source added that a gulf remains "between the speaker and the White House on the issue of medium- and long-term structural reforms."

The White House maintains it will still push for the big deal and reiterated rejection of a short-term, temporary agreement to get the debt ceiling raised, the senior administration official said.

Obama believes "it is time to solve this problem," White House Chief of Staff Bill Daley said on ABC's "This Week" program Sunday.

"This is the time to do it," Daley said, adding that Obama's "call to the leaders is to step up and be leaders."

The Treasury Department has warned that failure to do so by August 2 could lead to a possible default, which could push interest rates to skyrocket and cause the dollar to plummet. But Republicans, including those controlling the House, have insisted on large-scale budget cuts before raising the ceiling.

A U.S. default on its debt obligations would have "real nasty consequences" for the United States and the global economy, the new director of the International Monetary Fund said in an interview broadcast Sunday.

"It would jeopardize the stability at large," Christine Lagarde, who last week became the first woman to head the global financial institution, told ABC.

Lagarde said the IMF was concerned over the political stalemate in the United States that could prevent agreement on raising the federal debt ceiling, but hoped to see a compromise emerge.

Opinion: Go big on the debt ceiling

White House Communications Director Dan Pfeiffer said after Boehner's statement Saturday that to "back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington."

Both parties have thus far been unable to reconcile their radically divergent strategies to solve the nation's economic crisis, as Republicans refuse to raise taxes in a weak economy and Democrats denounce proposed cuts to entitlement programs as draconian and unacceptable.

According to the senior administration official, the breakdown over the tax revenue issue was disappointing because White House negotiators believed Obama was agreeing to some serious Medicare changes and generally putting a lot on the table.

The official said that before the Fourth of July weekend, Boehner agreed to let the Bush-era tax cuts on the wealthy expire as part of a broad tax reform package. That would be a significant shift by Republicans because it would decouple the tax rates for wealthy Americans from those for families earning less than $250,000 a year, a move the GOP has rejected in the past.

In return, Democrats were going to agree to significant Medicare reform, which is a major Republican demand, the senior administration official said.

At the end of last week, though, Boehner's representatives came back with a tax reform proposal that would simplify the system with three rates based on income, and all three lower than current levels, the administration official said. Democratic negotiators agreed to the idea, but insisted on families earning more than $250,000 a year taking on a greater overall tax burden, according to the official.

Boehner's response was the Saturday statement that a comprehensive deal was out of reach, the official said. Asked what happened, the official said it was possible that Boehner feared he would be unable to get the proposal he agreed to passed by the Republican-controlled Congress.

Obama had signaled a willingness to include reforms to popular entitlement programs such as Social Security and Medicare as part of a broad agreement for $3 trillion to $4 trillion in deficit cuts over the next decade, said Democratic officials familiar with the negotiations.

Boehner's announcement kept open the door for some sort of smaller agreement.

A spokesman for House Majority Leader Eric Cantor said talks led by Biden identified "between $2 trillion and $2.5 trillion in spending cuts that could represent the framework of" a smaller agreement. But he said that any tax hike cannot, and will not, be part of any deal.

"A tax increase cannot pass the House, and it is the last thing Congress should be doing with so many people out of work," said Brad Dayspring, the Virginia Republican's spokesman.

However, Van Hollen said on CNN that there never was agreement for more than $2.3 trillion in cuts in the Biden-led talks, and the Republican refusal to consider any tax increases talks would be "a major setback."

Republicans are "dreaming if they think we had $2.4 trillion in cuts," Van Hollen said. "We were nowhere close to that."

A House GOP leadership aide said earlier this week that both Cantor and the No. 2 Senate Republican, Jon Kyl of Arizona, voiced reservations at a White House meeting Thursday about the prospects for getting a $4 trillion package if it included $1 trillion in new tax revenues. Republicans were hesitant, the aide notes, to agree on any proposals that go much farther than simply closing loopholes.

Senate Majority Leader Harry Reid said Saturday that he was "disappointed that Republicans are unable to work with us to take a dramatic step forward that would have dramatically reduced our deficit."

"We asked Republicans to consider a balanced approach that would have required shared sacrifice, but they would not," said Reid, D-Nevada. "We still need to make sure we avert the economic catastrophe that would occur if we were to let America fail to pay its bills for the first time in our history, and I am confident that we will."

At the heart of the GOP resistance on the revenue issue is a bedrock principle pushed by anti-tax crusader Grover Norquist against any kind of tax increase at all. A pledge pushed by Norquist's group, Americans for Tax Reform, has been signed by more than 230 House members and 40 senators, almost all Republicans.Norquist and his supporters want to shrink the federal government and believe any new revenue would enable continued government growth.CNN's Tom Cohen contributed to this report.

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