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Republicans, President Obama inch towards debt compromise

Rep. Eric Cantor holds a news conference on Capitol Hill.

JEREMY HOBSON: Now let's get to the debate over raising the federal debt ceiling in exchange for trillions of dollars in deficit reduction. President Obama will sit down with lawmakers today at the White House in the first official talks since Republicans walked out of negotiations last month. There are reports this morning that both sides are putting things on the table that hadn't been on the table before.

Let's get the details from Diane Swonk chief economist with Mesirow Financial who is with us live from Chicago, as she is every Thursday. Good morning.

DIANE SWONK: Good morning

HOBSON: So Diane what's the latest that you're hearing on these debt talks?

SWONK: Well, we're finally starting to see both sides edge or inch closer together instead of running the other way from each other which is a major step forward. I know it doesn't sound like much, but having democrats willing to do much larger cuts, take away some of the ties to inflation on many of the entitlement programs. And on the other side of it republicans talking about tax reform -- maybe not tax cuts, but some form of tax reform. Those are both major steps toward each other after running away from each other for much of the year.

HOBSON: Well, Diane, let's listen to some of the latest here from one of the top republicans, House Majority Leader Eric Cantor.

ERIC CANTOR: Why would you want to raise taxes in a sputtering economy? And that's the position that we've held all along. So any discussion about loopholes must be accompanied by offsetting tax cuts.

Now Diane, that sounds like a guy who's sticking to his position. Do you think we're going to see a deal by this August 2 deadline that the Treasury Department has put out there in order to avoid a national default?

SWONK: Actually, you know that is a movement forward, believe it or not. To talk about eliminating loop holes and reforming taxes is a movement forward on the republican part. And I think we are going to see a deal done now because public opinion has shifted. More than 40 percent of Americans now that Moody's and S&P and all the rating agencies are threatening to downgrade our debt, even if we were to make debt service payments has now shifted and no one wants to go on their vacations after that August vote with the blood of the debt ceiling not being voted or increased on their hands.

HOBSON: Diane Swonk, chief economist with Mesirow Financial, thanks so much.

SWONK: Thank you.

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