Aug. 11 (Bloomberg) -- House Democratic leader Nancy Pelosi named three of her most trusted allies to the special committee charged with finding $1.5 trillion in budget savings, amid growing doubts about the panel reaching a compromise.
Democratic Representatives James Clyburn, Chris Van Hollen and Xavier Becerra will join Republican counterparts Dave Camp, Fred Upton and Jeb Hensarling. The Senate team includes Republicans Jon Kyl, Pat Toomey and Rob Portman and Democrats Patty Murray, John Kerry and Max Baucus.
Becerra brings to four the number of panelists who voted against a deficit-reduction plan last year while serving on a bipartisan commission set up by President Barack Obama. The commission, led by former Republican Senator Alan Simpson of Wyoming and Erskine Bowles, once President Bill Clinton’s chief of staff, proposed a mix of tax increases and spending cuts.
Congressional “leadership is sending a loud signal they didn’t like Bowles-Simpson,” said Robert Bixby, president of the nonpartisan Concord Coalition, an Arlington, Virginia-based group that advocates for a balanced budget. “If you are going to say taxes and entitlements are off the table, I don’t know what they can do that hasn’t already been done.”
The new 12-member panel was created in the Aug. 2 law that raised the nation’s debt limit and averted a default. Murray, of Washington, and Hensarling, of Texas, will be co-leaders.
With her appointments, Pelosi underlined Democrats’ resistance to cutting benefits in entitlement programs such as Medicare, the federal health-insurance program for the elderly.
“We must achieve a ‘grand bargain’ that reduces the deficit by addressing our entire budget, while strengthening Medicare, Medicaid and Social Security,” the California Democrat said in a statement.
The three Democrats named today are all close advisers to Pelosi and are dedicated to maintaining spending for Social Security and Medicare. All three favored rolling back tax cuts for the wealthiest Americans enacted under former President George W. Bush.
The choices from both parties include some “land mines,” Bixby said.
Murray will cause “certain alarm bells to go off” because she is in charge of her party’s principal fundraising committee for senators seeking re-election, Bixby said. Toomey, of Pennsylvania, and Hensarling are vocal anti-tax advocates, and all six Republican appointees have signed a pledge against voting to raise taxes. Upton’s panel has taken the lead on investigating Obama’s agenda, including the health-care law.
“This is not auspicious for a grand bargain,” Bixby said.
The American public is discouraged about the prospects government can fix the nation’s economic problems, according to a new Washington Post poll. Almost three-fourths of those responding said they have little or no confidence in the nation’s leaders to repair the economy and almost eight in 10 say they are dissatisfied with the way the political system is working, the Post poll shows.
The panel’s work has taken on greater urgency since Standard & Poor’s on Aug. 5 lowered the U.S.’s AAA credit rating for the first time, saying lawmakers weren’t doing enough to reduce record deficits by raising taxes or cutting spending and dismissing the Aug. 2 debt deal as inadequate. The so-called super committee will be the central focus of political and lobbying activity in Washington for the next four months, as industries try to protect their interests.
Even with the concern in Washington over the deficit and S&P’s downgrade, yields on U.S. debt have dropped since the ratings company’s action. The benchmark 10-year note’s yield has fallen from a 2011 high of 3.766 percent on Feb. 9 to as little as a record 2.0346 percent on Aug. 9, according to Bloomberg Bond Trader prices. The 10-year security traded at a yield of 2.306 percent at 2:19 p.m. in New York, less than half the average of 5.48 percent in 1998 through 2001, the last time the government had a budget surplus.
S&P’s decision is at odds with the top grades that the other two main ratings companies, Moody’s Investors Service and Fitch Ratings, still assign to U.S. debt.
Automatic Cuts Loom
While the bond market may not be putting on the pressure, the new panel is still facing a deadline: Unless it pushes through a deficit-reduction package by year’s end, $1.2 trillion in automatic, across-the-board spending cuts will be triggered over a decade, starting in 2013, equally targeting defense and non-defense programs. The 12 panel members need a simple majority to make a recommendation.
The deficit panel doesn’t include any lawmakers who backed the recommendations of the chairmen of Obama’s debt commission, with Becerra, Baucus, Camp and Hensarling all having voted against. Nor does it include any of the Senate’s “Gang of Six,” which also proposed a plan combining spending cuts and revenue increases. Baucus skipped many of the Bowles-Simpson commission’s meetings before blasting its proposed higher taxes and spending reductions because of how they would affect his home state of Montana.
“I’m discouraged,” said Bill Hoagland, a budget adviser to Republican congressional leaders from 1982 to 2007. “This is going to be an uphill battle to find a majority out of this group.”
All three senators named to the panel by Senate Majority Leader Harry Reid have said revenue increases should be part of a debt plan. Republican leaders reject that, saying the group should look only at spending cuts. The House Democrats named today all oppose aiming those cuts at entitlements.
Van Hollen, 52, ran the party’s fundraising arm for U.S. representatives for four years, helping expand the Democratic House majority in 2008. Residents of his Maryland district, just outside Washington, are better educated and wealthier than the average citizen in the state, according to data compiled by Bloomberg Government.
Lawyers and law firms, often including lobbyists, have been the top bloc of donors to Van Hollen, according to Washington’s Center for Responsive Politics, which tracks campaign-finance data. Retirees and those in real estate come next.
Becerra, 53, of California, vice chairman of the House Democratic Caucus, represents a district where residents have less money and less education than California’s average, according to Bloomberg Government data. Health professionals are Becerra’s biggest donors, followed by those in the entertainment business and then lawyers, according to the center.
Clyburn’s Bottom Line
Like his fellow panelists, Clyburn, 71, of South Carolina, has also made a point of the need to preserve spending for the elderly and poor. His district had a higher unemployment rate than the rest of the state, according to 2009 data compiled by Bloomberg Government.
“Throughout the deliberations on this debt crisis, my bottom line has been to protect Social Security, Medicare and Medicaid,” Clyburn, who is assistant minority leader, said in July, during the negotiations on the debt limit.
Clyburn’s top donor bloc during his career has been lawyers and law firms, followed by electric utilities and transportation unions, according to the Center for Responsive Politics.
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