Deficit committee locked in budget stalemate

WASHINGTON Wed Nov 16, 2011 6:11pm EST

1 of 2. An aide carries a signage as a group of lawmakers calling themselves the 'Go Big Coalition' meet for a news conference to encourage members of the so-called 'super committee' on debt reduction to find a large compromise at the U.S. Capitol in Washington, November 16, 2011.

Credit: Reuters/Jonathan Ernst

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WASHINGTON (Reuters) - Budget talks in Congress were locked in stalemate on Wednesday as Democrats and Republicans waited for the other side to make a new offer on taxes and healthcare.

With a deadline less than a week away, members of a 12-member "super committee" tasked with finding $1.2 trillion in budget savings confronted the same barriers that have thwarted earlier efforts to rein in the growing national debt, which crossed the $15 trillion mark on Tuesday.

Republicans, who have moved away from their staunch opposition to tax increases, said they would not give any more ground until Democrats consider reforms that would partially privatize the Medicare health-insurance program for retirees.

"I'm still waiting for a proposal that actually solves the spending crisis," the panel's top Republican, Representative Jeb Hensarling, told Reuters.

Democrats have proposed raising the Medicare eligibility age from 65 to 67 but have shied away from sweeping reforms. They proposed a $1 trillion tax increase last week.

"We are not going to accept a plan that gives tax breaks to the wealthiest Americans and balances all this incredible challenge we have on the backs of middle-class Americans," said Senator Patty Murray, the top Democrat on the committee.

Despite the posturing, negotiations continued behind the scenes. Democrats might reconvene later in the day after staffers assess a few options, Democratic Representative Xavier Becerra said. He would not say whether Democrats planned to float a new offer.

SOME URGE PANEL TO GO BIG

As negotiators grappled, some 50 lawmakers from both parties urged them to shoot for a much bigger deal that would come closer to the $4 trillion in savings that outside experts say is needed to keep U.S. debt at a manageable level.

"This is about more than money. It's about whether the president and Congress can competently govern," said Senator Lamar Alexander, the No. 3 Republican in the Senate.

A deal of that magnitude would almost certainly require substantial tax increases and spending cuts, angering interest groups on both sides as the 2012 election season heats up.

Interest groups like Americans for Tax Reform and the seniors' group AARP have mobilized to protect their turf, while the healthcare and defense industries are lobbying furiously to minimize the impact of any cuts.

One group came to Capitol Hill to say it was willing to sacrifice. About two dozen wealthy individuals, including several former officials at Google Inc., testified at a hearing and told reporters they were willing to pay more income taxes.

"Our country has been good to us. It provided a foundation through which we could succeed. Now, we want to do our part to keep that foundation strong so that others can succeed as we have," the Patriotic Millionaires for Fiscal Strength wrote in a letter signed by 138 group members to President Barack Obama and congressional leaders [ID:nN1E7AF1OQ]

The super committee faces a deadline of November 23, but any deal will have to be hammered out a few days before then to give budget analysts time to crunch the numbers. Negotiations are expected to go through the weekend.

Failure to reach a deal would trigger $1.2 trillion in automatic spending cuts that would fall equally on military and domestic programs. Republicans appear to be more alarmed by that prospect than Democrats, and some have proposed shifting the balance to ease the blow to the Pentagon.

Republicans also worry that Obama could allow taxes on the wealthy to rise at the end of 2012 if they don't agree to a permanent overhaul of the tax code by then.

Congress has until December 23 to approve any deal that emerges from the super committee. Failure to so could further anger a public that has been rattled by repeated budget showdowns this year, and prompt investors to question whether Washington has the willpower to make tough fiscal choices at a time when sovereign debt burdens in Greece, Italy and other countries are rattling world financial markets.

It could also make it harder for Congress to sign off on a number of expiring provisions, such as a payroll tax cut and enhanced jobless benefits, that could slow economic growth if they are allowed to lapse.

(Additional reporting by Thomas Ferraro, Susan Cornwell, Andy Sullivan and Rachelle Younglai; Writing by Andy Sullivan; Editing by Eric Walsh)

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