WASHINGTON (Reuters) - Budget experts warned on Tuesday of dire consequences if the congressional “super committee” fails to come up with a deficit reduction plan within a month, amid signs negotiations are faltering.
“I‘m worried you’re going to fail, fail the country,” Erskine Bowles, who was President Bill Clinton’s chief of staff and who helped lead a deficit-reduction panel last year, bluntly told the committee that is charged with finding at least $1.2 trillion in reductions over the next decade.
At a public hearing of the bipartisan super committee, Democrats said they would make concessions to reach a deal as long as Republicans also budge from long-standing positions.
“It’s not enough for either side to simply say they want to reduce the deficit,” said Senator Patty Murray, the panel’s Democratic co-chair. “Now is the time when everyone needs to be putting some real skin in the game and offering serious compromises.”
Democrats have been pushing for tax increases as part of any deficit-reduction package, with no sign so far that Republicans would go along. Republicans instead are focused on a tax reform that lowers income tax rates and spending cuts on healthcare and other federal benefit programs.
Little sign of progress has been seen in negotiations since last week when Democrats and Republicans swapped opening positions. The Democratic plan of about $3 trillion in deficit-reduction coupled tax increases with spending cuts. Republicans, meanwhile offered a $2.2 trillion over 10 years that focused heavily on spending cuts and claimed revenues largely through a tax overhaul that they said would boost economic growth.
Sources familiar with the discussions gave the six Republicans and six Democrats on the panel less than a 50-50 chance of reaching agreement because of an impasse over taxes.
If the committee fails to reach a deal before a November 23 deadline, $1.2 trillion in automatic spending cuts will be triggered across U.S. government agencies, beginning in 2013.
As the super committee was holding its hearing, Senate Republican leader Mitch McConnell was asked by reporters to assess the panel’s chances for success. His answer reflected the uncertainty surrounding the panel’s work.
“I have high expectations for the committee,” McConnell said, but added, “I‘m not going to speculate about what they may do. It was created to succeed, not to fail.”
POTENTIAL ‘DISASTER’ SEEN
McConnell’s counterpart -- Senate Majority Leader Harry Reid -- told reporters he hoped for a deal, “but you know, if they can’t get it done, they can’t get it done. You have to have two to tango.”
But Bowles said “I think it will be a disaster” if the super committee fails to get an agreement.
Credit ratings agencies have warned that failure to rein in America’s deficits could lead to a further downgrade of its AAA rating. Standard & Poor’s cut the long-term U.S. credit rating by one notch to AA-plus in August on concerns that Washington did not have the political will to deal with the country’s rising debt burden.
Another downgrade could cause U.S. interest rates to spike and lead to turmoil on financial markets at a time of global economic fragility.
Reid singled out House of Representatives Speaker John Boehner, a Republican, for saying he wants a “grand bargain” on deficit reduction but “without any sacrifice to their people (the wealthy) that have most of the money in this country.”
Democrats want to raise some taxes on the wealthy so that deficit-reduction efforts do not fall solely on government spending cuts.
Shortly before the hearing began, Democratic Senator Max Baucus said things were “starting to percolate.” He would not elaborate but predicted the committee would reach a deal.
Baucus is one of a group of six -- three Republicans and three Democrats -- that has been loosely formed within the super committee to work on a deficit-reduction deal of between $1.2 trillion and $1.5 trillion.
Congressional aides, who spoke on condition of anonymity, told Reuters Monday the breakout group was trying to make a deal because they thought differences between the sides over taxes and spending were too wide to agree on a multi-trillion dollar “grand bargain.”
Experts who have spearheaded past fiscal commissions said they feared party politics that were keeping lawmakers from tackling federal health and retirement programs spending and taxes would lead to a long-term decline of U.S. economic growth.
“The (super committee) has enormous power. What I don’t know is whether it will use that power,” said Pete Domenici, a former Republican Senate Budget Committee chairman who helped lead a debt reduction task force.
Additional reporting by Rachelle Younglai and Thomas Ferraro; Writing by Deborah Charles; Editing by Vicki Allen and Cynthia Osterman