By David Lawder
WASHINGTON (Reuters) - Republicans in the House of Representatives will not enter into any budget talks unless Democrats drop their demands for increased taxes, House Majority Leader Eric Cantor said on Friday
Cantor, speaking on the House floor, said it was unclear how deep divisions between the two parties over spending bills would be resolved in time to avoid a government shutdown on October 1.
He called on both the Republican-controlled House and the Democratic-controlled Senate to continue on their path of passing widely divergent appropriations bills.
Under procedures that have not been followed for years, the House and Senate have traditionally worked out differences between their budgets to agree on a spending cap for these measures. But such a conference has been thwarted by bigger disagreements over budget policy, including Republican demands to cut spending on health care and retirement benefits and Democratic demands to raise taxes.
"We don't want to go into a discussion if the prerequisite is, you have to raise taxes," Cantor said. "That's the bottom line. It's not process, it's substance. It is one of those issues that continues to make the divide between the parties."
Many Republicans, still smarting from the "fiscal cliff" tax hike on wealthy Americans in January, have vowed to oppose any further revenue increases. Meanwhile, revenue growth generated by an improving U.S. economy has caused deficit projections to shrink and has pushed back a deadline for raising the $16.7 federal borrowing limit to October or November.
The next fiscal deadline faced by Congress is the October 1 start of the 2014 fiscal year when new spending legislation is needed to keep agencies and programs running.
Cantor offered little insight into his party's strategy for resolving spending differences as the fiscal year-end approaches. And time is running short, with only four legislative weeks remaining before October 1. Congress takes a summer break in August and early September.
He said he is "very well aware that we have challenges ahead, and look to find resolution to those, yes, in a bipartisan way, and necessarily in a bicameral way."
Another roadblock is the ongoing "sequester" cuts, which threaten to reduce spending by another $109 billion next year. House Republicans are incorporating those savings into their $967 billion spending cap, while Senate Democrats assume they will be replaced, and are using a $1.058 trillion cap.
"There's a very substantial difference between the two houses. It has to be resolved," said Representative Steny Hoyer, the number two House Democrat, adding that a budget conference committee is the best way to work out these differences.
The spending bill divide will be highlighted next week, when the Senate takes up a $54 billion measure to fund transportation, housing and urban development projects. The measure is $11 billion higher than the House's version, which would reduce spending on these programs by $4.4 billion below current sequester-reduced levels.
(Reporting by David Lawder; editing by Jackie Frank)