Potent forces try to tie hands of deficit panel

WASHINGTON Fri Sep 16, 2011 4:37pm EDT

The Joint Deficit Reduction Committee meet for their first hearing on Capitol Hill in Washington, September 13, 2011. REUTERS/Jonathan Ernst

The Joint Deficit Reduction Committee meet for their first hearing on Capitol Hill in Washington, September 13, 2011.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - The days of "go big" in Washington's latest deficit-reduction drama are morphing into "don't go there."

When Congress formed a "super committee" in August to do what no regular committee has been able to accomplish -- fix the country's raging budget problems -- there was great hope in the air.

But with each passing day, some political leaders in Washington, including the president, have been trying to put major sources of savings off limits, potentially tying the bipartisan panel's hands.

"As the super committee begins its work, you're seeing all sides starting to draw lines," said Ryan McConaghy, director of the economic program at Third Way, a centrist Democratic think tank. "It highlights the political difficulty of getting a grand bargain."

In just the past week, look at what has happened:

The White House said President Barack Obama will not include Social Security, the federal pension program, in his recommendations for government savings.

House of Representatives Speaker John Boehner, the top Republican, said no to tax increases, Republican Senator Jon Kyl, a super committee member, closed the door to defense spending cuts and the No. 2 House Republican, Eric Cantor, said it could be that overall tax policy might have to wait until after the 2012 national elections.

If tax increases are not part of the mix, Democrats have vowed to block government-backed healthcare benefit cuts.

While the super committee is not obliged to follow the cues of Obama, Boehner and Cantor, it is stacked with members who have shown loyalty to their political leaders.

Whatever the super committee agrees to, if anything, the deal will have to pass the Democratic-controlled Senate and Republican-controlled House. If the committee deadlocks, $1.2 trillion automatic across-the-board spending cuts will be triggered, beginning in 2013, and divided equally between defense and domestic programs.

JUST A NEGOTIATING TACTIC?

It remains to be seen whether the early jockeying is mere opening negotiating tactics by Republicans and Democrats who will be facing each other at the polls next year or whether the two sides are beginning to polarize, as they have in every other major debate in the last two years.

If the former is true, congressional aides and budget experts in the private sector say there still is a slim chance the super committee could tackle the main drivers of government deficits -- exploding costs of federal healthcare programs amid relatively low tax receipts -- and exceed its mandate of at least $1.2 trillion in deficit reduction over 10 years.

That would hearten global financial markets and shore up the government's credit rating.

But if it's the latter, as more experts are betting in interviews with Reuters, it's a sign gridlock will prevail at least through next year's elections. With that, the United States could face another earthshaking credit downgrade following Standard and Poor's move last month to cut Washington's top-notch AAA rating.

"I think they probably can get to $500 billion, maybe even the whole $1.2 trillion in various discretionary spending cuts, taxes and some entitlement changes around the edges," said one lobbyist who is eyeing the debate closely.

The special panel was created from a searing summer battle over raising the U.S. debt limit that left politicians battered and voters angry.

After months of seeing lines drawn in the sand, some lawmakers proclaimed everything would be "on the table" in the search for hundreds of billions in new government savings.

Tax hikes, government healthcare benefits, farm subsidies and all other hot-button programs were fair game.

"I am willing to discuss all issues that might help us reduce our short- and long-term debt and grow our economy," Representative Dave Camp, a respected Republican member of the super committee told Reuters in mid-August.

Just a few days ago, a large group of business leaders and former government officials wrote the super committee: "We urge you to 'go big'" with large-scale government savings.

But if defense, Social Security, Medicare, Medicaid and tax increases turn out to be off limits, is there any way the super committee can "go big" and produce $2 trillion or $3 trillion in new savings on top of the $917 billion enacted in August?

Most budget experts say it's impossible because there are not enough savings to be had by just eliminating government waste or digging deeper into domestic programs like law enforcement and transportation, or even ending foreign aid.

(Editing by Eric Walsh)

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Comments (8)
Whittier5 wrote:
It would really help if reporters didn’t further complicate this already complicated issue by continuing to mis-identify Social Security, MediCare and Unemployment Insurance as Federal Spending. They are not.

They are special insurance funds which are funded by special tax collected from workers and placed into nominal Trust Funds.

There is NO problem with Social Security funding through 2036. If the FICA Tax Cap is eliminated for those making over $107,000, which is simply Welfare for the Well-off, Social Security will be solvent through the 21st Century.

The Bush MediCare Part D Prescription Coverage is a problem because like the 2 wars, Bush got us into this without providing any form of Revenue to support it. This does need to be rectified.

Sep 16, 2011 6:45pm EDT  --  Report as abuse
BurnerJack wrote:
There needs to be a binding referendum put forth by the People to mandate the Federal government to report according to Generally Accepted Accounting Practices (GAARP). Anything less is a fraud.
If anyone reading this can come up with a legitimate reason to the contrary, please do. The People have a right to know where their money is going and how it’s getting there. A legitimate government has a duty to provide that information without delay or complaint.

Sep 16, 2011 9:31pm EDT  --  Report as abuse
UnPartisan wrote:
@whittier5

The cap of $107,000 is in no way shape or form welfare for the well off. Social Security is a retirment program, your proceeds are directly related to the ammount of money that you contribute. Increasing the cap will directly increase the ammount of money that due to be paid out. You also forget that you pay 7.6% and your employer pays 7.6%, you will yet again increase business expenses. The way to fix social security is to increase the retirement age. It was not designed to cover 20-30 years of retirement, it was designed for more like 10-15 years. Increase the cap will put more money into the system now, but it is a delayed fix. Social Security is supposed to currently ran like a pyramid scheme when that money should have been treated like a trust fund and never raided for the general budget. If the top (people withdrawing) becomes larger than the base (people contributing)it collapses. I do agree about the Bush Medicare Part D Prescription Coverage entireley though.

Sep 16, 2011 11:06pm EDT  --  Report as abuse
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