September 16, 2011 / 8:38 PM / 6 years ago

Potent forces try to tie hands of deficit panel

WASHINGTON (Reuters) - The days of “go big” in Washington’s latest deficit-reduction drama are morphing into “don’t go there.”

When Congress formed a “super committee” in August to do what no regular committee has been able to accomplish -- fix the country’s raging budget problems -- there was great hope in the air.

But with each passing day, some political leaders in Washington, including the president, have been trying to put major sources of savings off limits, potentially tying the bipartisan panel’s hands.

“As the super committee begins its work, you’re seeing all sides starting to draw lines,” said Ryan McConaghy, director of the economic program at Third Way, a centrist Democratic think tank. “It highlights the political difficulty of getting a grand bargain.”

In just the past week, look at what has happened:

The White House said President Barack Obama will not include Social Security, the federal pension program, in his recommendations for government savings.

House of Representatives Speaker John Boehner, the top Republican, said no to tax increases, Republican Senator Jon Kyl, a super committee member, closed the door to defense spending cuts and the No. 2 House Republican, Eric Cantor, said it could be that overall tax policy might have to wait until after the 2012 national elections.

If tax increases are not part of the mix, Democrats have vowed to block government-backed healthcare benefit cuts.

While the super committee is not obliged to follow the cues of Obama, Boehner and Cantor, it is stacked with members who have shown loyalty to their political leaders.

Whatever the super committee agrees to, if anything, the deal will have to pass the Democratic-controlled Senate and Republican-controlled House. If the committee deadlocks, $1.2 trillion automatic across-the-board spending cuts will be triggered, beginning in 2013, and divided equally between defense and domestic programs.


It remains to be seen whether the early jockeying is mere opening negotiating tactics by Republicans and Democrats who will be facing each other at the polls next year or whether the two sides are beginning to polarize, as they have in every other major debate in the last two years.

If the former is true, congressional aides and budget experts in the private sector say there still is a slim chance the super committee could tackle the main drivers of government deficits -- exploding costs of federal healthcare programs amid relatively low tax receipts -- and exceed its mandate of at least $1.2 trillion in deficit reduction over 10 years.

That would hearten global financial markets and shore up the government’s credit rating.

But if it’s the latter, as more experts are betting in interviews with Reuters, it’s a sign gridlock will prevail at least through next year’s elections. With that, the United States could face another earthshaking credit downgrade following Standard and Poor’s move last month to cut Washington’s top-notch AAA rating.

“I think they probably can get to $500 billion, maybe even the whole $1.2 trillion in various discretionary spending cuts, taxes and some entitlement changes around the edges,” said one lobbyist who is eyeing the debate closely.

The special panel was created from a searing summer battle over raising the U.S. debt limit that left politicians battered and voters angry.

After months of seeing lines drawn in the sand, some lawmakers proclaimed everything would be “on the table” in the search for hundreds of billions in new government savings.

Tax hikes, government healthcare benefits, farm subsidies and all other hot-button programs were fair game.

“I am willing to discuss all issues that might help us reduce our short- and long-term debt and grow our economy,” Representative Dave Camp, a respected Republican member of the super committee told Reuters in mid-August.

Just a few days ago, a large group of business leaders and former government officials wrote the super committee: “We urge you to ‘go big’” with large-scale government savings.

But if defense, Social Security, Medicare, Medicaid and tax increases turn out to be off limits, is there any way the super committee can “go big” and produce $2 trillion or $3 trillion in new savings on top of the $917 billion enacted in August?

Most budget experts say it’s impossible because there are not enough savings to be had by just eliminating government waste or digging deeper into domestic programs like law enforcement and transportation, or even ending foreign aid.

Editing by Eric Walsh

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