UPDATE 2-Republican tax hardliners make US debt super panel
* Republican appointments set stage for likely tax dispute
* Senate Republicans tap Tea Party favorite Toomey
* Much may depend on former budget chief Portman
* House Democrats to fill last three spots by next Tuesday (Adds Ornstein, Brown, Portman, Norquist, Toomey, Ryan comments)
By Kevin Drawbaugh and Donna Smith
WASHINGTON, Aug 10 (Reuters) - Republicans named mostly anti-tax hardliners to the U.S. congressional deficit-cutting super committee on Wednesday, setting the stage for continued deadlock in a battle that has roiled global markets.
The six Republicans appointed included Senator Patrick Toomey, a favorite of the conservative Tea Party movement. The 12-member panel, being asked to forge a compromise that has eluded Congress for months, also will include six Democrats, three of whom were announced on Tuesday. [ID:nN1E7781VW]
Republican Senator Rob Portman, whose direction of the U.S. Office of Management and Budget during President George W. Bush's administration gives him fiscal gravitas, may be the pivotal member of the committee. Toomey and Senator Jon Kyl are the two other Senate Republicans on the panel.
The three House of Representatives Republicans named to the panel were Dave Camp, who chairs the powerful tax-writing Ways and Means Committee, along with Fred Upton and conservative "young gun" Jeb Hensarling.
All six of the Republicans are known as opponents of tax increases, some more than others.
"You might say without much exaggeration that the future of the global economy rests in the hands of Rob Portman," Norm Ornstein, a fellow at the conservative think tank American Enterprise Institute, told Reuters Insider.
"I don't think you're going to find any of those House Republicans willing to vote for a plan that includes a dime of revenue increases," he said.
"So the question is, will Rob Portman ... make a 7-5 vote joining with the Democrats, or will we end up with gridlock or much less, which is not likely to help us out of the deep mess we're in?"
FACTBOX-Committee members, contenders [ID:nN1E7721BX]
FACTBOX-Tax breaks on reform hit list [ID:nN1E7701SV]
Lawmakers flung vitriol at each other for more than three months before agreeing on Aug. 2 to raise the federal debt ceiling, avoiding a U.S. default, and setting up the panel known as the Joint Select Committee on Deficit Reduction.
Its task: To find $1.5 trillion more in budget savings over 10 years and issue its recommendations by Nov. 23. Those savings can include spending and tax measures.
Congress must vote on the recommendations, on an up-or-down basis with no amendments, by Dec. 23. If either of the two deadlines goes unmet, $1.2 trillion in automatic budget cuts will be triggered in 2013 -- a prospect expected to motivate lawmakers to make something meaningful out of the committee.
Portman said in a statement that he "will work hard to ensure that meaningful spending cuts are made to reduce our deficits." His statement made no mention of tax reform.
A trio of Democratic senators were appointed to the panel on Tuesday: Max Baucus, John Kerry and Patty Murray. The three remaining slots are to be filled by House Democratic Leader Nancy Pelosi by Aug. 16.
"Kerry is a guy who might be able to work out some kind of a deal with Portman," Ornstein said.
Murray and Hensarling will co-chair the committee. Leaders in the House and Senate made the appointments.
The GOP appointments "will make sure that you don't get any tax increases," said FBR Capital Markets policy analyst Ed Mills, predicting Portman will be the star of the committee.
"The best news is that we have avoided appointment of any bomb-throwers. You have some serious people here," Mills said.
He said deadlock on the panel could result in tax and spending plans being drawn up by members, but then sent to regular congressional committees for further debate in 2012.
"Those plans will serve as the backdrop for the 2012 elections and both parties will run on their plans. Much of the election will be a referendum on whose plan gets to move forward in 2013," Mills said.
MARKETS ON EDGE
As markets whipsawed following a historic Standard & Poor's downgrade of the U.S. credit rating and a deal to raise the debt ceiling that only postponed tough decisions, hopes for a fiscal policy breakthrough by the panel were on the rise.
Democratic Senator Sherrod Brown praised Senate Republican Leader Mitch McConnell for including Portman.
"Rob has shown a willingness to find common ground by looking at both tax reform and spending cuts in order to reduce the deficit. It's time to stop the bickering and put the country first," Brown said in a statement.
Anti-tax activist Grover Norquist, head of Americans for Tax Reform, attacked the Democrats picked so far for the panel, focusing on Murray.
"She's on the budget committee ... the last two years that never wrote a budget," he told Reuters in an interview. "The Democrats put on hacks who don't write budgets."
He predicted the panel would not include revenue increases "because the House won't pass it."
Facing unprecedented deficit and debt challenges, Congress has failed to reform the convoluted U.S. tax code or address long-term funding problems for the government-run Medicare and Medicaid health care programs and the Social Security retirement program.
The tax code, riddled with loopholes for corporations and individuals worth billions of dollars, has not been thoroughly overhauled since President Ronald Reagan did so in 1986.
While some Democrats dispute the urgency of reforming entitlement programs, such as Medicare and Social Security, it is widely acknowledged that a demographic tidal wave is fast closing in on the programs as baby boomers age.
Toomey told reporters in a telephone conference call that he was not interested in tax increases that would hurt economic growth. But he said the tax code has "indefensible" special interest tax breaks that could be considered. And he noted that he voted to end a tax subsidy for corn ethanol producers.
"I very strongly hope that the committee is going to be able to reach agreement," Toomey said. He said that would be a better outcome than triggering $1.2 trillion in automatic spending cuts, half of which would come from defense.
Notably excluded from the "Super Committee" was Republican Representative Paul Ryan, a Republican star whose plan for slashing Medicare costs and benefits gave Democrats political ammunition.
Leaving Ryan off the panel could prevent his plan from re-emerging as a top campaign issue in 2012. In a statement, he praised Boehner's selection of Camp, Hensarling and Upton and said he asked to be excluded since he chairs the budget committee. (Additional reporting by Richard Cowan in Washington and Dan Burns in New York; Editing by Howard Goller and Paul Simao)
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