| WASHINGTON, Sept 7
WASHINGTON, Sept 7 When a new "super committee"
in Congress begins work this week on reducing U.S. budget
deficits, the financial world will be watching to see just how
serious Washington is about getting its fiscal house in order.
The Joint Select Committee on Deficit Reduction --
featuring six Republican and six Democratic members of Congress
-- was created in early August as part of a deal that achieves
$917 billion in spending cuts coupled with an increase in U.S.
Now, this special committee will try to find at least $1.2
trillion more in savings in the next decade. Credit ratings
agencies will judge the panel's results, which could have a
profound impact on the country's fiscal health. Already, one
agency, Standard & Poor's, has downgraded U.S. debt.
Here are some key points to keep in mind:
WILL THE SUPER COMMITTEE SUCCEED?
Democrats and Republicans are urging bipartisanship.
Nonetheless, the panel will be working in a highly charged
atmosphere after a bitter fight over raising the debt limit and
amid presidential campaigns that are heating up.
If Republicans cannot go along with tax hikes and Democrats
form a wall of opposition against cuts to government healthcare
or retirement benefits, it likely will be doomed to failure.
But if both sides keep everything on the negotiating table
and if nobody walks out of the talks or is seen as trying to
poison the atmosphere, some sort of deal might be reached.
Congress has to vote on it by a Dec. 23 deadline.
If a majority of the panel agrees to a deal, no amendments
can be made by Congress, which would have until Dec. 23 to
approve or reject the measure.
WHAT ABOUT EXTERNAL FORCES?
The committee will be under pressure from lobbyists. U.S.
defense contractors, for example, will fight deep Pentagon
Some healthcare industry lobbyists and some liberal groups
hope the committee fails. They fear they would suffer bigger
cuts under a deal than if the super committee fails and
automatic spending cuts are instead triggered, beginning in
And then there are the Republican presidential candidates.
Their campaigns will be heating up as the super committee is
deliberating. If those candidates ratchet up their rhetoric
against any tax increases, it will be more difficult for
Republicans on the panel to embrace deficit-reductions through
Conservative Tea Party activists who seek to cut the size
of government want only spending cuts. Liberal groups want a
"balanced" approach that includes tax increases.
WHAT IF GLOBAL ECONOMIES TANK?
If economic growth further deteriorates in the United
States or if European debt problems jeopardize the American
economy, there could be more pressure on the panel for a deal
-- and maybe even one bigger than the $1.2 trillion in added
WHAT MIGHT A DEAL LOOK LIKE?
There could be some savings in the Medicare healthcare
program for the elderly -- ones that do not reduce benefits but
cut costs in other modest ways. Some new revenues, such as
ending some special interest corporate tax breaks, could be
included. But it is unclear if Republicans would insist on an
equal amount of income tax rate cuts.
A partial deal is also possible. If the panel cannot get to
$1.2 trillion in savings over 10 years, it could agree on
several hundred billion dollars worth. The rest would be
achieved through automatic spending cuts starting in 2013.
The question is whether Congress late in 2012, after
congressional and presidential elections, would let those
automatic spending cuts go forward.
A deal also could include savings outside the mandated
10-year budget window, said Alex Brill, a research fellow at
the conservative American Enterprise Institute. Those
longer-term savings could be aimed at Medicare, Medicaid or
Social Security and would amount to a lot of money, he said.
WHAT WILL HAPPEN ON THURSDAY?
The super committee holds its first meeting, which will be
open to the public.
The members will deliver opening statements, which will
give some clues as to how partisan a fight this will be. They
also will weigh the rules under which they will operate.
That will be followed by the panel's first public hearing
on Tuesday, when it will hear from the Congressional Budget
Office chief. A few more hearings are likely.
(Editing by Bill Trott)