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Budget Talks Target One Year Deal as Lawmakers Protest

U.S. budget negotiators plan to work this weekend from a shrinking menu of options to ease automatic spending cuts for as little as one year amid objections from some groups and lawmakers, said people familiar with the talks.

A potential compromise being crafted by the two leaders of a 29-member panel is drawing protests from Democrats and also from groups including federal employees, who could contribute more to their pensions under the proposal, and airlines, which could face higher fees. Some Republicans are concerned that a bipartisan deal will replace spending cuts set in law with promises of future savings that might not be realized.

Representative Paul Ryan and Senator Patty Murray, the lead negotiators, probably won’t find it easier to reach a deal by narrowing the options, said Maryland Representative Chris Van Hollen, the top Democrat on the House Budget Committee.

“This has been a negotiation of subtraction,” said Van Hollen, citing Republican opposition to ending corporate tax breaks, a proposal Democrats favor.

“Narrowing the options doesn’t always make it easier,” he said. “You can still have a lot of disagreement over what the remaining options are.”

Congressional aides say Murray, of Washington, and Ryan, of Wisconsin, may urge the House and Senate to vote directly on their accord, bypassing the bipartisan panel that has a self-imposed Dec. 13 deadline for a plan.

Pentagon Cuts

The negotiators have been seeking to boost domestic and defense spending by $65 billion over two years to ease the effects of spending cuts on the Pentagon and programs including scientific and medical research and services for poor children.

While some budget aides say a two-year deal is still a goal, a one-year accord could be more in the range of $35 billion, according to experts.

An agreement of that size would be a sliver of the $1 trillion to $4 trillion in savings budget negotiators had aimed to identify during three years of failed budget talks. The current panel, created in legislation to end the 16-day October government shutdown, started with a modest goal to replace the automatic spending cuts for two years at a cost of $100 billion to $200 billion.

Ryan and Murray were seeking to reach a deal by this week, before House Speaker John Boehner of Ohio introduces a stopgap bill to fund the government, which could come next week. The spending plan is fallback option favored by Republicans eager to avoid another government shutdown.

‘Still Talking’

Congressional aides are already discussing the parameters of a short-term bill, probably lasting three months, to fund the government, according to a Republican leadership aide.

Asked if a budget deal could be reached for a vote next week, Ryan told reporters, “I don’t know, we’re still talking.”

Boehner, at a news conference today, said he’s “hopeful” Ryan and Murray can reach a deal that would pass both chambers.

A budget accord under discussion would ease some of the automatic spending cuts for one year instead of two, according to a congressional aide close to the talks who requested anonymity.

“This deal is either going to be really pathetic or it’s not going to be a deal,” said Steve Bell, a former Senate budget adviser now with the Bipartisan Policy Center.

Spending Framework

The emerging compromise provides a framework to reach an agreement on government spending -- either by the budget panel’s deadline or before federal spending authority expires on Jan. 15. It doesn’t include an agreement to raise the nation’s borrowing limit, another potential fiscal showdown Congress faces early next year.

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The menu of options Murray and Ryan are considering include raising the fees paid by airline passengers, or boosting the co-called Sept. 11 security fee on airline tickets. Budget experts estimate adjusting airline fees could save as much as $11 billion to offset some automatic cuts.

Airlines for America, a Washington-based trade group for carriers including Delta Air Lines Inc. (DAL) and US Airways Group Inc. (LCC), greeted travelers and lawmakers returning to Washington airports this week with leaflets and air sickness bags marked: “Are higher taxes on air travel making you ill?”

Other options under consideration include $20 billion in changes to federal retirement programs that would increase worker contributions, and auctioning government-owned airwaves.

Republican Letter

A group of 18 House Republicans concerned that negotiators will trade spending cuts set in law for future savings that may not materialize are drafting a letter to Boehner in support of a spending bill of $967 billion. They may also object to using higher fees to offset the cuts. Negotiators had been discussing a deal with a $1 trillion spending cap.

“Democrats are not interested in solving the problems created by the sequester,” said Representative Steve Scalise, a Louisiana Republican and chairman of the Republican Study Committee. “They are only interested in using the threat of the cuts as leverage to increase spending across the board, to increase our national debt, and to raise taxes and fees.”

Another potential pitfall is Democratic demands that emergency unemployment insurance for 1.3 million Americans, which expires on Dec. 31, be part of any deal.

‘Cannot Support’

“We are making a very clear statement that we cannot, cannot support a budget agreement that does not include unemployment insurance in the budget or as a sidebar,” said House Democratic leader Nancy Pelosi of California.

House Democratic leaders today held a news conference expressing concern that their priorities, including ending corporate tax breaks and infrastructure investments, were being left out of the discussions.

Ryan has previously shared with Republican lawmakers ideas including increased premiums for pension plans backed by the Pension Benefit Guaranty Corp. and a cut in Medicaid payments to hospitals. Lawmakers including Senator Jeff Sessions of Alabama, the top Republican on the Budget Committee, have floated a proposal to push some spending cuts into future years.

Another option being discussed is giving the U.S. Postal Service flexibility to reduce costs, according to an aide close to the talks, most notably by ending Saturday mail delivery.

Cuts to workers’ compensation and retirement for federal employees are unacceptable as part of a deal that wouldn’t end all of the automatic cuts, said Colleen Kelley, president of the National Treasury Employees Union.

“Enough is enough,” she said today on a conference call with reporters. “Their workloads have increased because of hiring freezes and they just went through a morale-killing 16-day shutdown.”

The two House Democrats who would round up votes for a compromise, Steny Hoyer, the No. 2 Democrat, and Van Hollen, represent Maryland districts that include many federal workers.

“I vehemently oppose efforts to target and single out these hardworking, middle-class Americans who play a critical role in maintaining the safety, security, and well-being of our nation,” Hoyer said today in a statement.

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net; Peter Cook in Washington at pcook6@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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