The Obama administration said on Tuesday that budget negotiators in Congress would probably fail to strike a far-reaching deal unless Republicans agree to raise revenues and overhaul the tax code.
A 29-member congressional committee is trying to set spending levels for the fiscal year that began last month, and many lawmakers want to scrap large spending cuts that started in March.
The discussions, however, are hung up on differences regarding America's programs for elderly health care and its Social Security pension system, which many economists warn cannot be funded over the long term under current tax policies.
While President Barack Obama, a Democrat, is not officially a part of this process, his treasury secretary said the administration feels an overhaul of America's welfare state should not happen without rewriting tax laws and raising federal revenues. Republicans generally oppose any tax hikes.
"I don't want to get ahead of the budget conferees," Lew told a business panel, saying the lawmakers could produce something "small, medium or large."
But if Republicans don't embrace tax reform and higher revenues, he said, "then something large is not likely."
Last week, budget negotiators said they were still far from an agreement and put off scheduling any other public meetings.
(Reporting by Jason Lange; Additional reporting by Anna Yukhananov; Editing by Andrea Ricci)
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