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Debt talks: Both sides digging in

By Jessica Yellin and Gloria Borger, CNN
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  • Both sides realize politics are at play
  • But they acknowledge a need to show their bases they are fighting for their priorities
  • And at the same time, produce a deal that can pass both houses of Congress

Washington (CNN) -- Democrats are still insisting any deal to raise the debt ceiling include revenue increases while Republicans maintain that cannot pass Congress, both Democratic and Republican sources familiar with the talks said Thursday.

White House negotiators had put on the table proposals to bring in more than $400 billion in revenue over the next decade by limiting itemized deductions for those above the 28% bracket, eliminating subsidies for the oil and gas industry and for corporate jets and for interest on investments, according to Democrats familiar with the negotiations. In the past, Democrats have opposed attempts to limit itemized deductions.

Separately a White House official familiar with the talks told CNN: "Republicans want to get something done, and they don't know how to do it. If there is a mega-deal, it has to have a tax component. Otherwise, what we get will be much smaller."

But Republicans insisted that will not fly.

"Almost none of what the White House is talking about on the tax side can pass the Congress because House Republicans won't vote for it," a Republican source familiar with the talks said. "They might as well demand that we have herd of unicorns as tax hikes," the source said. "It will never happen."

Senate shortens holiday to work on debt

When the negotiations involving Vice President Joe Biden and Republican congressional leaders broke down last week, the two sides were about $800 billion apart in spending cuts, the Democratic sources said.

"We had a detailed discussion of how all these things would work, and I think you know they didn't sign onto any of them. And they don't tell us there is enthusiasm for any of them, but they do acknowledge they don't have the votes in their caucus to pass this on their own. And they do recognize Democrats are going to have to have some skin in the game," one Democratic official said about the Republicans.

The GOP source pointed out that right now "the debt ceiling is even less popular than health care reform," which makes it less dangerous politically for Republicans to oppose raising the ceiling.

Both sides realize politics is at play here, but also acknowledged a need to show their bases they are fighting for their priorities while producing a deal that can pass both houses of Congress.

"It has to be a balance between the sides. This is a deal where nothing is agreed to until everything is agreed to," one of the Democratic sources said.

Democrats said before the debt talks collapsed Republicans were willing to consider some reductions in defense spending as part of a broader deal.

"They are more open to it than in the past -- although it's still a contentious issue in their ranks," one Democratic source said.

The Republican source said there is some willingness to tackle defense cuts as well as a spending cap, which would include defense spending. The White House had proposed an enforcement mechanism that would trigger additional savings if a certain ratio of deficit to growth was reached. However, some doubt how much money those deals would save.

CNN's Kevin Bohn and Gabriella Schwarz contributed to this report.