US Republicans vow to fight for spending cuts as deficit shrinks

Wed May 15, 2013 8:12pm EDT

Related Topics

* Lawmakers reaffirm 10-year balanced budget goal

* Seek to tie debt limit hike to tax reform

By David Lawder and Rachelle Younglai

WASHINGTON, May 15 (Reuters) - Republicans in the House of Representatives vowed on Wednesday to press on with their campaign to further slash spending on U.S. government benefits programs despite evidence that the deficit is shrinking rapidly.

The lawmakers said the gap between revenue and spending is closing, but not by nearly enough, so they are sticking to their goal of balancing the federal budget within a decade.

On Tuesday the Congressional Budget Office said strong tax and other revenues caused it to slash its fiscal 2013 deficit forecast by more than $200 billion - to $642 billion, the smallest gap since 2008.

CBO said the brighter picture could push a deadline for raising the debt limit - necessary to avoid default on U.S. debt or a partial government shutdown - into November, from previous estimates of late July or early August.

When Republicans agreed to extend U.S. borrowing capacity in February, they had anticipated a summer deadline for raising the limit - over which they would demand cuts to Social Security and Medicare.

"It may change the amount and the size of the debt ceiling but it doesn't change the reality of the debt ceiling," said Representative James Lankford, a member of the House Republican leadership and the Budget Committee.

"We are never paying our principal. We are always adding to it," he said after a Republican strategy session on the deficit and the debt ceiling.

Even if Congress takes no further action, the deficit will shrink to $378 billion by 2015, the CBO said, in line with deficits during the George W. Bush administration.

At just 2.1 percent of U.S. economic output, many economists consider that level to be easily sustainable.

DEBT LIMIT LEVERAGE

House Ways and Means Committee Chairman Dave Camp said Republicans discussed the possibility of tying a later debt ceiling increase to tax code reforms.

He provided no details on how the two would be linked.

The Republicans said there were few specific policies discussed in the session to reach a balanced budget in 10 years, but members agreed that reforms to entitlement programs were needed.

Lawmakers also said they discussed using the debt ceiling as leverage to repeal Obama's healthcare law.

Some members dismissed the CBO revisions as driven by temporary factors, such as decisions by many wealthy Americans to realize capital gains income in 2012 to avoid higher 2013 tax rates - a phenomenon that temporarily pushed up tax receipts this spring.

Repayments from bailed-out, government-controlled mortgage funding giants Fannie Mae and Freddie Mac also contributed to the lower deficit estimates.

Representative Kevin Brady of Texas, co-chairman of the House Joint Economic Committee, said Republicans were taking a longer view of U.S. deficits.

"A quarter bump because of the capital gains increase and Fannie and Freddie paying some money back is not what you build an economy and deficit reduction plan on."

House Budget Committee Chairman Paul Ryan was asked about suggestions from some Democrats that Republicans might now be more willing to agree to a debt limit increase without significant deficit reduction measures.

"Well, it's pretty clear we're not going to do that," the 2012 Republican vice presidential nominee said.

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