UPDATE 1-New U.S. Congress deficit panel sets first meeting

Fri Sep 2, 2011 3:52pm EDT

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* Panel meeting in public, unlike past budget talks

* First public hearing also scheduled, for mid-September (New throughout)

By Richard Cowan

WASHINGTON, Sept 2 (Reuters) - A newly-formed congressional panel on deficit reduction next week will kick off months of arduous negotiations that will be closely watched by financial markets hoping for a deal that puts the United States on an improved fiscal path.

The opening meeting of the bipartisan "super committee" will be held on Sept. 8, the co-chairs announced on Friday. It will convene just hours before President Barack Obama unveils his latest jobs-creation initiative to a joint session of Congress.

That initiative and the super committee's work are both aimed at healing a U.S. economy that has been struggling to grow after a deep recession which began at the end of 2007.

The United States is still suffering the after-effects of that recession with high unemployment -- 9.1 percent in the latest government estimate.

Washington's ability to deal with joblessness and slow economic growth will have an impact on the outcome of the November 2012 presidential and congressional elections.

The deficit-reduction panel will also hold its initial public hearing on Sept. 13, when it will review the history and causes of the growing U.S. debt, said co-chairs Democratic Senator Patty Murray and Republican Representative Jeb Hensarling.

Congressional Budget Office Director Douglas Elmendorf is scheduled to testify.

The committee is tasked with finding at least $1.2 trillion in new government savings over the next decade and has a Nov. 23 deadline for doing so.

At its meeting, which will be open to the public, the committee will consider rules under which it will operate, according to a press release.

But with Democrats and Republicans jockeying for best position in the run-up to the 2012 elections and with the two political parties holding vastly different views on how to fix the economy, the panel's work will not be easy.

The special committee -- with six Republicans and six Democrats from both houses of Congress -- was created by legislation enacted in early August that cleared the way for raising the U.S. debt limit and avoiding a likely default on government loans. The debate on that legislation was bitter.

The measure included $917 billion in spending cuts over 10 years to help tame budget deficits that have been hovering well above $1 trillion annually.

The super committee is expected to consider a mix of spending cuts and possibly tax increases to reach additional government savings of at least $1.2 trillion. U.S. credit rating agencies are hoping for savings well beyond that figure.

It is unclear whether cuts in benefits to Medicare, Medicaid and Social Security recipients would be proposed.

If a majority of the new committee cannot agree on a deficit-reduction package, automatic spending cuts of at least $1.2 trillion would be triggered in 2013. They would be divided equally between defense and domestic programs.

In announcing that its first two gatherings would be open to the public, the special committee is responding to criticisms that deficit-reduction negotiations earlier this year were always behind closed doors. (Editing by Mohammad Zargham)

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