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Sources: McConnell floats entitlement changes in high-stakes fiscal talks

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(CNN)Mitch McConnell privately wants the White House to pay this price to enact a major budget deal: Significant changes to Social Security and Medicare in exchange for raising the debt ceiling and funding the government.

Several people familiar with the high-stakes fiscal negotiations said the Senate majority leader's staff is trying to drive a hard bargain in the private talks with the White House and Democratic leaders.
McConnell is seeking a reduction in cost-of-living adjustments to Social Security recipients and new restrictions on Medicare, including limiting benefits to the rich and raising the eligibility age, several sources said. In addition, the Kentucky Republican is eager to see new policy riders enacted, including reining in the Environmental Protection Agency's clean water regulations.
    White House officials are already rejecting such entitlement changes. But the demand by McConnell showcases the major gulf that exists between the two sides as they try to avoid a potential fiscal calamity if the United States fails to raise the national debt ceiling by Nov. 5 or stumbles into a government shutdown by mid-December.
    The talk comes as McConnell finds himself in a tough spot headed into a pivotal stage in the negotiations -- especially amid the turmoil across the Capitol. House Speaker John Boehner, who wants to resign by month's end, said he's eager to "clean up the barn" and get hot-button issues off the table for the next speaker. But with House Republicans in turmoil over his successor and consumed with a messy leadership fight, Boehner is in many ways insulated from political pressures from the right and could get a deal without worrying about a revolt.
    Meanwhile, Democratic leaders are betting that the blame of any shutdown or default will fall largely on Republicans, giving their party leverage to force GOP leaders into making concessions to raise the debt ceiling and cut a budget deal that increases domestic spending.
    That puts the pressure squarely on McConnell. The GOP leader, who won reelection last year and promised that his majority would prove Republicans would avoid fiscal crises, is eager to find a bipartisan consensus. Yet in the aftermath of Boehner's demise, McConnell is facing renewed criticism from the party's right flank, which is only bound to grow more pronounced if he cuts a deal viewed as a capitulation to the White House.
    To that end, McConnell is hoping that the White House agrees to some concessions as part of a fiscal agreement that Congress may quickly seek to enact after lawmakers return from recess next week. And he has taken a hardline on other matters too, including refusing to take up a stand-alone bill to revive the Export-Import Bank, siding with fiscal conservatives over the business community in the divisive party fight.
    McConnell spokesman Don Stewart declined to comment on the GOP leader's proposal in the talks with Democrats, citing the private nature of the fiscal discussions. White House officials also refused to discuss any specific proposals being traded in the talks.
    But even though the White House has backed some entitlement changes in the past, notably overhauling how Social Security cost-of-living payments are calculated, a spokeswoman said that the President would not accept them in the current round of negotiations if they were offered.
    "Proposals such as raising the eligibility age for Medicare and changing the way Social Security retirement benefits are indexed to inflation are non-starters for the administration and Democrats in Congress," said Jennifer Friedman, a White House spokeswoman.

    The GOP's dilemma

    It's unclear how firm of a line McConnell is willing to draw in the fiscal negotiations.
    With 24 GOP Senate seats in contention next fall, including in blue and purple states like Pennsylvania, New Hampshire, Ohio, Illinois and Wisconsin, the GOP leader can't afford to see his party take a major hit from yet another fiscal debacle in Washington.
    Privately, McConnell has urged Rep. Paul Ryan, R-Wisconsin, to seek the speakership, believing he needs a strong partner to get the GOP back on track and help usher through major fiscal deals.
    McConnell's chief deputy, Sen. John Cornyn of Texas, said in a recent interview that he's ready to raise the debt limit "until 2017" in order to get the matter off the table during an election year. McConnell, sources say, feels the same way, and the two sides are discussing the possibility of raising the debt limit until March 2017, just two months after a new president and Congress are sworn in.
    If there's a deal, the two parties would likely just agree on overall spending numbers, cuts to offset the spending increases and raising the debt ceiling. They would punt other matters, like highway funding and program-by-program spending levels, until later this year. Getting a deal, however, remains anything but assured.
    McConnell knows full well he can't simply accept what the White House and Democrats want: Higher domestic spending levels that exceed existing budget caps and a debt ceiling increase with no strings attached. Republicans are eager to see an increase in defense spending, but Democrats want defense and domestic spending to increase equally -- or about $76 billion total.
    In order to agree on overall spending levels, party leaders are also looking at areas within the federal budget to cut spending, prompting McConnell to float the roll back on costly entitlement programs.
    But agreeing on offsets are typically the most complicated parts of any fiscal agreement. Anything short of that could prompt a sharp push back from fiscal hawks eager to preserve the budget caps under the across-the-board cuts known as sequestration.
    "When you're undoing sequestration, you're going to have resistance from a lot of us," Sen. Jeff Flake, R-Arizona, said.
    News of McConnell's move began to divide the GOP on Tuesday. Former Arkansas Gov. Mike Huckabee, a presidential candidate, said he was "greatly concerned" about McConnell's proposal.
    "This is the same GOP congressional leadership that has failed to repeal ObamaCare, defund Planned Parenthood, stop the Iranian nuclear deal, build the Keystone pipeline, defend traditional marriage, secure the border, and reject Obama's illegal executive amnesty," Huckabee said. "But now we should trust them to 'reform' Social Security and Medicare -in exchange for more deficit spending and endless debt?"