06/07/2011 04:38 pm ET | Updated Aug 07, 2011

Jon Kyl: Debt Ceiling Hike Should Be Paired With $2.5 Trillion In Cuts

WASHINGTON -- Senate Republicans are aiming to cut at least $2.5 trillion over the next decade in a deal to raise the federal debt limit, Sen. Jon Kyl (R-Ariz.) said on Tuesday.

Kyl, who is representing Senate Republicans in bipartisan debt talks, told reporters that his party is seeking "$2.5 trillion -- at a minimum -- in savings" over the next 10 years in exchange for raising the debt ceiling by about $2.4 trillion. Kyl's remarks echo House Speaker John Boehner's (R-Ohio) calls for cuts equal to the amount the debt ceiling is raised.

Although those participating in the talks have said they have been productive so far, Kyl cautioned that negotiators could fall short of coming to $2.5 trillion in cuts before Aug. 2 -- the date the government will begin to default on its loans. The government reached its debt limit -- currently set at $14.29 trillion -- on May 16, but Treasury Secretary Timothy Geithner has said the agency will not begin to default on its loans until about Aug. 2.

In that event, Congress might need to pass small, short-term increases on the debt limit while the details of a larger deal are ironed out, Kyl said.

"If we don't get to that $2.5 trillion, I don't think there would be much of an appetite on our side to raise the debt ceiling by $2.4 trillion," he said.

The bipartisan debt ceiling group is aiming to finish its work "sometime in July," Kyl said, throwing water on a call by Boehner to raise the debt ceiling by the Fourth of July.

He declined to go into specifics on the cuts settled so far, which he previously said stand at about $150 billion. But Kyl said the group will have to make cuts to Medicare that go beyond just elimination of waste, fraud and abuse.

"People should not be under the impression that waste, fraud and abuse is going to be the amount of savings we need to get to," he said. "There's some money to be had there, but it's up there with foreign aid. It's less than one percent."

In addition to the risk of the government defaulting on its loans, Kyl said the markets could respond badly if a deal is not reached.

"If we don't identify significant changes, if we don't have a way to ensure that the proceedings are played out, if we don't find a way to save Medicare, for example, then I think the markets could interpret the result as a failure," he said. "The pressure is on us."