June 17 (Bloomberg) -- Vice President Joe Biden said he and a group of U.S. lawmakers trying to hash out a deficit-reduction plan are determined to find $4 trillion in savings and prove to financial markets around the world that the government is serious about tackling the nation’s debt.
“What is the shtick out there? This is a dysfunctional place, can’t get anything done,” Biden told reporters late yesterday after the group’s third closed-door meeting this week. “The single most important thing to do for the markets is to convince them that ‘no, no, that’s not true, we can handle difficult decisions and make them.’”
He said “everybody wants an agreement -- there is no principal in that room that doesn’t want to get an agreement that bends the curve on the long-term debt, that is sufficiently realistic to get us to $4 trillion over a decade or so in terms of reductions.”
Much of yesterday’s meeting centered on entitlement programs unrelated to health care, said House Majority Leader Eric Cantor, a Virginia Republican.
Representative Chris Van Hollen, a Maryland Democrat and another member of the group, said it is pushing to reach a deal by early July. The aim is to reach a budget-reduction deal in time for Congress to meet an Aug. 2 deadline for raising the nation’s $14.3 trillion debt limit.
“We’ve very serious about seeing if we can come to some resolution,” said Cantor.
‘Around the Clock’
Lawmakers said they plan to pick up the pace of negotiations, with as many as four meetings next week. “We’ve told people to take bigger chunks of time out of their calendar,” said Biden. “This next week we’re going to be going basically, the staff, around the clock.”
The group focused today on possible spending cuts for military and federal workers’ pensions and programs including agriculture, said Van Hollen. Such mandatory non-health spending accounts for about 12 percent of the federal budget, underscoring the difficulty of cutting trillions of dollars over the next 10 years.
The meeting ended hours after the Senate voted, with 33 Republicans in support, to end a tax break for ethanol production -- a proposal that had been long stalled amid concerns it would amount to raising taxes. Van Hollen called the vote a “good sign” that “people are willing to close special-interest corporate loopholes for the purpose of deficit reduction.”
Earlier yesterday Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, had expressed skepticism that Biden’s group would tackle the politically sensitive entitlement programs experts say will fuel the government’s long-term debt woes.
“I’m concerned they will come up with a plan that doesn’t fundamentally change the trajectory of our debt but just gets by this debt limit vote,” he told reporters. “That would be a real missed opportunity.”
Biden said the group has “gone through a first serious scrub of each of the categories that make up the total federal budget,” with each side identifying which areas they could compromise on if a final deal appears possible. “There are differences that are going to have to be bridged that won’t occur until the end,” he said.
Said Van Hollen: “We’ve got a long way to go here before we resolve the toughest issues.”
Republicans are insisting on trillions in savings in exchange for their votes to increase the debt ceiling, which is needed to avoid a first-ever government default. Democrats say major changes to Medicare, the long-term driver of the debt, are off the table, while Republicans have dug in against tax increases.
Biden expressed confidence that any deal reached by the group could clear Congress, though he said it couldn’t pass without broad bipartisan support.
“There’s no way you can could think of anything where you could have it delivered by only Democrats and there’s no way you can have any agreement that’s only going to be delivered by Republicans,” he said.
“At the end of the day we’re going to have to decide on what is good for the country that actually gets the rest of the world saying ‘these guys are getting their house in order, they’re on the right track,” Biden said.
“It has to be real, there has to be a real down payment and there has to be a real path that people believe ‘Yes, it’s possible, it’s probable they’ll get at the end of 10 years $4 trillion.”
According to an analysis by the nonpartisan Committee for a Responsible Federal Budget in Washington, there are areas of overlap in debt-reduction plans proposed by House Republicans and the White House, making them fodder for a possible compromise.
These include: eliminating some interest subsidies on student loans, which could save $20 billion to $65 billion over 10 years; changing the way the Pension Benefit Guaranty Corporation collects fees, to save $5 billion to $10 billion; selling excess federal property for $10 billion to $15 billion; and reducing health-care fraud and overpayments, at $10 billion to $35 billion.
Even with these savings, achieving $2 trillion over 10 years remains elusive unless lawmakers tackle Medicare, said Ed Lorenzen, senior adviser at the budget policy research center. “If you’re not dealing with the health entitlements in a significant way or adding in revenues, it’s going to be hard” to find significant savings, he said.
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