WRAPUP 2-Reid, Boehner huddle on U.S. budget deal

Tue Nov 15, 2011 6:24pm EST

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* No sign of a deal, but no sign of stalemate either

* Reid, Boehner meet to see if deal is possible

By Richard Cowan and Donna Smith

WASHINGTON, Nov 15 (Reuters) - The top Democrat in Congress said on Tuesday he saw few signs of progress on a deficit-cutting deal as negotiators struggled to bridge their differences on tax increases and benefit cuts.

His Republican counterpart, meanwhile, predicted that Congress would approve a deal that might emerge from a 12-member "super committee" tasked with finding $1.2 trillion in budget savings.

Democrats and Republicans on the panel have less than a week to come up with a plan, but the two sides remain far apart on how much of that total should consist of tax increases and how much should come from trimming retirement and health benefits.

Any agreement would likely challenge orthodoxies on the left and the right as the 2012 election season heats up. Party leaders would have to twist arms to ensure passage through the Republican-controlled House of Representatives and the Democratic-controlled Senate.

House Speaker John Boehner huddled with the top Democrat, Senate Majority Leader Harry Reid, to see if a deal was possible.

Republicans have moved off their staunch anti-tax stance in recent weeks, and Democrats have shown a willingness to rein in benefit programs like Medicare that are projected to blow a hole in the budget over coming decades.

After the 40-minute meeting in Boehner's elaborate office in the Capitol, Reid said he still saw no sign that Republicans will agree to the amount of tax hikes that Democrats want.

"So far I have not seen any indication Republicans are willing to agree to this balanced approach," he told reporters.

The panel has not held a full meeting for two weeks, though members have been working in smaller, informal groups. A deal will need to be reached before the formal Nov. 23 deadline to give budget analysts time to crunch numbers.

No new proposals have emerged since the two sides floated, and rejected, rival plans last week.

Republicans continued to ask Democrats for more deficit-reduction ideas, while Democrats said they wanted more details on how much new tax revenue they would be willing to accept. The two sides may opt to count future savings from winding down wars in Iraq and Afghanistan, which would make it easier to reach their target or include economy-boosting elements like enhanced unemployment benefits.

UNTIL THE LAST MINUTE

Aides said there was no sign of a deal, but also no sign of a stalemate. Talks are expected to continue until the last possible minute.

"I am still hopeful that a few Republicans will put their country first and come to us with a credible offer," the panel's top Democrat, Senator Patty Murray, told reporters after meeting with fellow Democrats on the panel.

As Murray met with fellow Democrats on the panel, Republican negotiators met with their party leaders.

"It's getting late, but I'm not giving up hope," Representative Jeb Hensarling, the panel's top Republican, told reporters.

Even if the panel reaches a deal, Reid and Boehner would have to ensure that it has enough support to pass Congress. Boehner in particular would face pressure from a conservative flank that has refused to back other budget agreements this year.

"I'm convinced that if in fact there is an agreement that it can in fact pass," Boehner told reporters after meeting with fellow Republicans.

The two congressional leaders were key players in an April budget deal that avoided a partial government shutdown and describe each other as friends.

Congress already faces rock-bottom approval ratings after a bruising year of budget battles that have pushed the federal government to the brink of default and prompted a first-ever downgrade of U.S. debt.

Failure by the super committee could further undermine public confidence and lead investors to question whether Washington has the political will to make tough fiscal choices at a time when debt burdens in Greece, Italy and other countries are rattling world financial markets.

It would not necessarily prompt another debt downgrade because automatic spending cuts totaling $1.2 trillion would kick in, falling equally on military and domestic programs.

Analysts have voiced concern that sharp spending cuts could slow already tepid economic growth.

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