Lew Says Republican Revenue Letter ‘Hopeful’ Debt-Talks Sign

The director of the White House Office of Management and Budget, Jacob Lew, said the willingness of 40 House Republicans to support revenue increases is a “hopeful sign” for a congressional supercommittee’s efforts to find a debt-reduction compromise.

The “world is waiting anxiously” to see if the supercommittee can reach an agreement, Lew said today at a forum sponsored by Politico Playbook in Washington. “The Republicans have to make a decision that they’ll put everything on the table,” including revenue, he said.

Forty House Republicans and 60 Democrats sent a letter to members of the supercommittee urging them to seek a deal that includes increased revenue and a larger $4 trillion deal. “This would be a very good opportunity for Congress to show that it can govern,” Lew said.

Lew said federal agencies are facing “tough choices” as they plan budgets.

“We’ll have less money to spend next year than we had last year” and “there will be a lot of disappointed programs and communities,” Lew said. “The arithmetic is kind of unavoidable.”

The Pentagon, he said, must distinguish “the nice-to- have” from the “need-to-have” items.

The supercommittee, a bipartisan 12-member debt-reduction panel seeking a $1.5 trillion deal, is closing in on its Nov. 23 deadline. If it doesn’t make the deadline or if Congress doesn’t adopt its recommendations by December, there will be across-the- board spending cuts of $1.2 trillion to defense and domestic programs to take effect in 2013.

Committee Deadlocked

The committee has been deadlocked over Democrats’ insistence on tax increases and Republicans’ refusal to accept them.

Lew said there’s a “risk” of a government shutdown in December because of a “relatively small” group of lawmakers, he said, referring to members aligned with the Tea Party. “There’s no doubt that this could become another one of those ideological head-to-head conflicts.”

Lew said he stays in touch with members of the supercommittee who “don’t want to fail,” he said.

Lew said he’s “optimistic” that past “drama” surrounding shutdowns and the debt limit can be avoided.

Lew said he’s reviewing agency budgets now with the goal of submitting plans to the agencies on the Monday after Thanksgiving.

Debt-Cutting Plans

Last week, Republicans offered a $2.2 trillion debt- reduction plan that included $640 billion in revenue raised largely from higher Medicare premiums, rather than from the types of tax increases Democrats are calling for.

On Nov. 1, the leaders of President Barack Obama’s fiscal commission, former Clinton White House Chief of Staff Erskine Bowles and former Wyoming Republican Senator Alan Simpson, urged the supercommittee to seek a more aggressive debt-reduction package, saying it must include both higher tax revenue and trims to entitlement programs.

Last December, Obama’s debt commission rejected a recommendation by Bowles and Simpson for a $3.8 trillion budget- cutting plan that included a mix of tax increases and spending cuts.

To contact the reporter on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net

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

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