Senators Press Obama to Deal on Debt-Cut Plan in Boost for Grand Bargain

A bipartisan majority of the U.S. Senate called on President Barack Obama to lead a broad effort to slash the nation’s debt through spending cuts and tax increases as part of negotiations on this year’s budget.

A letter to Obama today signed by 64 senators said “comprehensive deficit-reduction measures are imperative” and the president’s leadership is vital.

“With a strong signal of support from you, we believe that we can achieve consensus on these important fiscal issues,” the letter said.

The call for Obama to widen the budget talks, made by 32 Republicans and 32 members of the Democratic caucus, gives a boost to a bipartisan group of six senators trying to craft a sweeping deficit-reduction plan that can pass Congress. The number of signatures suggests that the group’s effort to reach a grand bargain on spending and taxes has picked up support that may help propel an eventual agreement through the Senate.

“I expected a lot, but this is an awful lot,” said Senator Michael Bennet, the Colorado Democrat who circulated the letter this week with Republican Senator Mike Johanns of Nebraska. “I hope it will keep the conversation moving forward and the Gang of Six working.”

Pressure on Obama

Photographer: Joshua Roberts/Bloomberg

U.S. President Barack Obama. Close

U.S. President Barack Obama.

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Photographer: Joshua Roberts/Bloomberg

U.S. President Barack Obama.

The letter also ratchets up pressure on Obama, who has said he is prepared to work with members of both parties on debt reduction, yet hasn’t put forward a plan. It says the discussion should include cuts to the part of the budget that Congress controls, as well as changes to entitlement programs such as Social Security and Medicare, and a tax overhaul.

“We now have a very substantial number of senators who are saying, ‘Look, we’ll step out there, we’ll make hard decisions, we’ll look at this from a comprehensive standpoint, but we need the leader of the country,’” Johanns told reporters in a conference call.

The White House issued a statement calling the letter a “positive development.” It said Obama has already made “down payments” on slashing the debt, including by calling in his latest budget for a five-year freeze on non-defense spending controlled by Congress and limits on tax deductions for high- income earners.

“The president agrees that any serious discussion of how to tackle our long-term fiscal situation needs to include entitlements and tax reform, which is why he committed to take on both in his State of the Union address,” said Amy Brundage, a White House spokeswoman.

‘Something Big’ Happening

Budget experts who have been pushing for a debt-reduction effort hailed the letter as a sign of momentum toward the goal.

“No one wants to make the first move on this issue, but if no politicians act, our creditors surely will,” Maya MacGuineas of the Committee for a Responsible Federal Budget said in a statement. “Something big is happening, and those who don’t confront our fiscal situation head on are going to be left behind.”

Even with the fresh show of support, the six senators face long odds as they seek a deal that would contain politically painful steps for each party. Democrats are wary of undercutting entitlement programs, particularly Social Security, while Republicans are loath to raise taxes.

As a result, the six may opt for setting targets to slash Social Security and Medicare in the future, rather than pushing legislation that contains specific cuts and tax increases.

Political Benefits

While short of the grand bargain that some lawmakers envision, members of the group increasingly believe that avoiding detailed proposals now may be the only way to gain congressional support, according to people familiar with their views.

Setting deficit-cutting benchmarks has political benefits: It would allow lawmakers to go on record backing debt reduction -- responding to growing pressure from voters -- yet delay casting votes to cut popular programs or raise taxes.

“It’s probably the more politically viable way, partially because we don’t have time to do the major reforms in all of the major authorization programs,” said Senator Rob Portman, an Ohio Republican who served as President George W. Bush’s budget chief. Portman, who signed the letter, said there is support for the idea of “establishing what has to be the savings, and then forcing Congress and the administration to do it.”

‘Only Shot’

Senate Budget Committee Chairman Kent Conrad, a member of the negotiating team, said during a March 15 congressional hearing that while the approach is “imperfect,” it may be Congress’s “only shot.” The North Dakota Democrat -- like the other five senators involved -- declined to detail the deliberations or confirm any agreement.

The proposal has risks, because Congress could simply ignore the spending and revenue goalposts. It also may not satisfy many lawmakers clamoring for quick, dramatic action to bring down the debt, including Tea Party-backed Republicans who made the deficit the centerpiece of their insurgent campaigns, and some Democrats whose votes would be critical.

“It’s going to be necessary to provide more detail than that to make real progress,” said Senator Ron Wyden, an Oregon Democrat.

Pressure is mounting on the six senators, led by Democrat Mark Warner of Virginia and Republican Saxby Chambliss of Georgia, to come up with a blueprint. The impasse over a series of short-term spending bills to fund the government this year -- the latest of which cleared Congress yesterday and was signed by Obama today -- underlines challenges facing the group.

Like Gramm-Rudman

While the plan would include some policy prescriptions, it is likely to stop short of legislative language, according to people familiar with the talks. The vehicle for enacting the group’s work could be an amendment to legislation to increase the debt ceiling similar to the 1985 Gramm-Rudman-Hollings Act that set goals for specific cutbacks.

After the measure passed, Congress could enforce the benchmarks by using its 2012 budget blueprint to order congressional committees overseeing entitlement programs and taxes to draw up legislation hitting the targets.

Lawmakers in both parties are growing frustrated debating non-defense domestic discretionary spending in areas like education and transportation that account for 12 percent of the federal budget. Entitlements make up more than 40 percent.

Broader Discussions

In recent weeks, Senate leaders in both parties have insisted on a broader discussion about entitlement and tax reform. The calls for action reflect rising public alarm over the deficit and its effect on economic growth.

A Bloomberg National Poll earlier this month found concern about the deficit growing, with 29 percent citing it as the most important issue, second only to jobs, which was chosen by 43 percent. At the same time, lopsided majorities opposed cuts to Medicare or social programs that depend on congressional appropriations.

With the latest temporary spending bill set to expire April 8, Congress is moving closer to a succession of confrontations that may force the issue of dealing with entitlements.

Lawmakers must vote on this year’s budget, debate a 2012 plan that will emerge next month and decide as early as May on raising the national debt ceiling.

To contact the reporters on this story: Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net; Heidi Przybyla in Washington at hprzybyla@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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