Supercommittee Seeks Path on Deficit Amid Republican Skepticism

Members of the supercommittee are seeking a path forward on stalled deficit-reduction talks even as some Republican lawmakers cast doubt on whether any accord with tax increases could pass the House of Representatives.

A bipartisan group of panel members met today as the Nov. 23 deadline draws near with little sign that Republicans are budging on their anti-tax stance or that Democrats will agree to major changes to entitlement programs.

“We are painfully, painfully aware of the deadline that is staring us in the face,” Republican co-chairman Jeb Hensarling told reporters this morning.

“The word is today that they may not get to some kind of agreement,” Representative Jim Jordan of Ohio said on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “It would be difficult” to win passage of a plan that includes more taxes, said Jordan, head of the fiscally conservative Republican Study Committee.

Republicans yesterday offered a $643 billion deficit- reduction package, a Republican leadership aide said today. Democrats found the offer unacceptable because it didn’t do enough to raise revenue, according to a Senate Democratic leadership aide. Both aides spoke on condition of anonymity because they weren’t authorized to discuss the negotiations.

Fallback Plan

The Republican aide said the offer was intended as a fallback as the panel looks for $1.2 trillion in deficit cuts before the deadline. The party’s proposal included $640 billion in spending cuts and interest savings, and $3 billion in increased revenue from ending a tax break for corporate jet travel; it didn’t cut entitlement programs such as Social Security, Medicare and Medicaid that Democrats are trying to protect, the aide said.

Senior aides to House Speaker John Boehner, an Ohio Republican, made the offer yesterday to staff members of Senate Majority Leader Harry Reid, a Nevada Democrat, the Democratic aide said. Democrats didn’t find the offer acceptable, the aide said, and complained about Republicans disclosing it to reporters during the talks.

The offer of about $3 billion in revenue “doesn’t meet any standard of fairness, any standard of common sense,” said Senator John Kerry, a Massachusetts Democrat on the supercommittee.

Divided Over Taxes

“Where the divide is right now is on taxes, whether or not the wealthiest Americans should share in the sacrifice,” Democratic Senator Patty Murray of Washington, the co-chair of the panel, said before supercommittee Democrats met this afternoon.

Earlier today a bipartisan group of five senators on the supercommittee, plus Democratic Representative Chris Van Hollen, met to try to break the logjam.

Republicans are “dug in” on extending the George W. Bush- era tax cuts and lowering the top rates for high earners, Van Hollen, of Maryland, told reporters before the meeting. “Negotiations are continuing, but we’ve made it clear that that doesn’t meet the test of balance.”

“We are going to work as long as it takes to get an agreement,” Democratic Senator Max Baucus, another participant in the meeting, told reporters. Also attending were Kerry and Republican Senators Jon Kyl of Arizona, Pat Toomey of Pennsylvania and Rob Portman of Ohio.

‘Tough Negotiation’

“It’s a tough negotiation,” Kerry said after the meeting.

A bloc of congressional Democrats said they are worried about proposals under discussion, such as lowering the top tax rate to 28 percent from 35 percent or cutting spending by $876 billion. If the deadlock continues past Nov. 23, at least $1.2 trillion in automatic spending cuts could take effect in 2013, split between defense and domestic discretionary programs.

“It looks harder today than it did certainly two weeks ago,” supercommittee member Van Hollen, the top Democrat on the House Budget Committee, told Bloomberg Television today.

A Republican aide said Republicans are no longer demanding a new Democratic proposal to proceed and that Republicans haven’t given up on a bipartisan deal.

The automatic budget-cutting process, known on Capitol Hill as sequestration, was supposed to be the stick to encourage Democrats to agree to entitlement program cuts and Republicans to accept tax increases.

Instead, Democrats who represent districts with many elderly or low-income residents said sequestration is preferable to some options being considered by the supercommittee, such as limiting benefits in programs like Medicare.

Not Worst Thing

“Sequestration is not the worst thing that could happen,” said Representative Keith Ellison, a Minnesota Democrat and co- chairman of the Congressional Progressive Caucus. “Getting a deal where there’s minimal revenue and all cuts on ordinary people, I’d rather see sequestration than that.”

That thinking was echoed in interviews with Democratic Representatives Raul Grijalva of Arizona, Laura Richardson of California, Michael Capuano of Massachusetts, Chaka Fattah of Pennsylvania and Sheila Jackson Lee of Texas.

Richardson said across-the-board cuts are the most equitable way to reduce the deficit by hitting programs favored by both Democrats and Republicans.

“Defense is going to have to pay its fair share,” Richardson said. “I’m not going to be inclined to support further domestic discretionary cuts until I see other groups taking some of the same responsibilities.”

House Republicans

Even if the supercommittee agrees to legislative language that would reduce the deficit by $1.5 trillion over 10 years, the position of these lawmakers reflects the challenge leaders will face shepherding a deal through Congress. Both chambers must pass legislation by Dec. 23 to avoid the cuts. Democratic votes will be needed because many Republicans, especially in the House of Representatives, have signaled opposition to an agreement that includes tax increases or lacks big cuts to entitlement programs.

Hensarling has said Republicans won’t go beyond their offer to raise tax revenue by $300 billion until Democrats offer a plan to address the growth in spending on entitlement programs.

House Democratic leader Nancy Pelosi of California said the “only way we will be able to reach an agreement” is if Republicans accept balance between revenue increases and spending cuts.

Raising Revenue

Democrats have no plans to propose structural changes to entitlement programs unless they are part of a bigger deal that would raise close to $1 trillion in revenue, said a Senate leadership aide. The aide said yesterday the process is deadlocked and neither side wants to declare it dead until next week. The talks are continuing in the hope of a breakthrough, the aide said.

If the supercommittee falters, lawmakers will face a debate this time next year over expiration of the Bush-era tax cuts that President Barack Obama agreed to extend in December 2010. Obama has said he won’t support renewing the tax cuts again for high earners. Congressional Democrats want to apply to deficit reduction the $800 billion in revenue over 10 years that would result from ending tax cuts to those earning more than $200,000 a year and married couples earning more than $250,000.

“If the supercommittee did nothing, you’d have a couple of things happen,” Fattah said. “You’d have the sequestration of funds, but you’d also have the Bush tax cuts go out of existence and that would be another almost $4 trillion in revenue.”

The supercommittee has unique influence because if it agrees to a deficit-reduction proposal, that legislation must be considered on the House and Senate floors and can’t be subjected to amendments or filibusters. Capuano said he would like to “fight it out” over the tax cuts through the regular legislative process next year.

“I didn’t vote for them; I didn’t vote to extend them and I won’t vote to extend them again,” he said.

To contact the reporters on this story: Steven Sloan in Washington at ssloan7@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

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

3:55

Nov. 18 (Bloomberg) -- U.S. Representative David Schweikert, an Arizona Republican, talks about prospects for Congress's debt-cutting supercommittee to reach an agreement by Nov. 23. Members of the supercommittee are seeking a path forward on stalled talks even as some Republican lawmakers cast doubt on whether any accord with tax increases could pass the House of Representatives. Schweikert speaks with Peter Cook on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

2:16

Nov. 18 (Bloomberg) -- Republicans and Democrats on the supercommittee yesterday called on each other to make the first move toward compromise. A bloc of congressional Democrats is viewing the potential impasse of the supercommittee as a chance to revive fights over ending the George W. Bush-era tax cuts and making deep reductions in entitlement spending. Bloomberg's Peter Cook reports. (Source: Bloomberg)

5:08

Nov. 18 (Bloomberg) -- U.S. Representative Chris Van Hollen, a Maryland Democrat and a member of the congressional deficit-reduction supercommittee, talks about the outlook for the panel to come up with a plan by its Nov. 23 deadline. He speaks with Peter Cook on Bloomberg Television's "In the Loop." (Source: Bloomberg)

5:53

Nov. 18 (Bloomberg) -- U.S. Representative Dennis Kucinich, an Ohio Democrat, talks about the U.S. economy and prospects for agreement by the deficit-reduction supercommittee by its Nov. 23 deadline. Kucinich, speaking on Bloomberg Television's "InBusiness With Margaret Brennan," also comments on the bankruptcy of MF Global Holdings Ltd. (Source: Bloomberg)

2:49

Nov. 18 (Bloomberg) -- Matthew Dowd, Bloomberg political analyst and former chief campaign strategist for George W. Bush, talks about "Washington insider" questions facing Republican presidential candidate Newt Gingrich, and outlook for the U.S. deficit-reduction supercommittee. Dowd speaks with Stephanie Ruhle and Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)