Sen. Graham: Republicans Should Accept Tax Revenue Increase

ABC News' Jonathan Karl and Gregory Simmons report:

As Congress and the president try to strike a deal to cut spending and raise the debt ceiling, one Republican Senator tells ABC News that prospects look bleak.

“Right now I’m very worried,” Senator Lindsey Graham (R-S.C.) told ABC News “Subway Series.” “If I were a betting man, I’d bet no [deal].”

You can watch the latest installment of ABC’s “Subway Series” with Senator Graham HERE.

Senator Graham said Republicans should be willing to accept a deal that curbs entitlement spending and increases tax revenues by closing loopholes.

“To me, that makes sense,” he said. “That way you don't raise tax rates, but you do generate new revenue by closing loopholes. You're giving money away to a few people at the expense of many, and I think it's time to reevaluate that.”

The obvious solution, Graham said, is for Republicans to give some ground on taxes and for Democrats to give some ground on entitlements. But he doubts negotiators will get there before August 2nd.

“How to get there from here?” Graham said. “President says he’s not going to do a short term extension. [Republicans] are saying we aren’t going to generate any new revenue. [Democrats] are saying they aren’t going to do it without revenue. Well, somebody’s got to blink.”

Graham may be right. Even as the Congressional leaders met Tuesday at the White House, key players in both parties said the debt ceiling talks had reached an impasse over irreconcilable differences on both taxes and spending.

One top Democratic aide predicted it will take a market crash or near-crash to break the impasse, while a top Republican aide said, “It’s even doomier and gloomier than you think.”

Graham said closing tax loopholes and eliminating almost all deductions could both lower tax rates and generate significant revenue to reduce annual deficits.

“You're giving money away to a few people at the expense of many, and I think it's time to reevaluate that,” Graham said. “If you did away with all deductions and exemptions except charitable giving and the mortgage interest, that's $1.2 trillion that's spent every year.”

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