November 20, 2011 / 4:30 PM / 8 years ago

Debt-reduction panel spirals toward failure

WASHINGTON (Reuters) - After more than two months of talks, the congressional deficit-reduction committee looked set to concede failure, unable to bridge deep partisan differences over taxes and spending going into the 2012 elections.

U.S. Senator John Kerry (D-MA), one the lawmakers on the 12-member "super committee," appears on "Meet the Press" in Washington, in this handout photograph taken and released on November 20, 2011. REUTERS/William B. Plowman/NBC NewsWire/Handout

Republican and Democratic lawmakers cast doubt on any possibility of agreement in appearances on Sunday talk shows. Without some unexpected breakthrough, aides said, the 12-member bipartisan “super committee” will admit defeat on Monday.

Some of the panel members appeared to be stepping up blame as the clock ticked toward an imminent deadline. They must vote on any deal by Wednesday but Monday is the deadline to have legislation written and presented to the entire committee.

“Nobody wants to give up hope. Reality is, to some extent, starting to overtake hope,” Representative Jeb Hensarling, the panel’s Republican co-chairman, said on “Fox News Sunday.”

President Barack Obama, a Democrat seeking re-election in November 2012, has avoided direct involvement in the talks after making his recommendations in September.

But a White House spokeswoman urged the panel to make the “tough choices” to complete its task - a package of at least $1.2 trillion in deficit reduction over the next decade.

On NBC’s “Meet the Press” program, neither Republican Senator Jon Kyl nor Democratic Senator John Kerry gave any indication a deal was near. They stuck to their parties’ entrenched positions and blamed the other side for deadlock.

If the panel does not reach consensus, automatic spending cuts of $1.2 trillion over a decade are due to start in 2013.

Failure by the committee of six Republicans and six Democrats, created in the wake of the battle over the federal government’s debt ceiling last summer, could cement notions of a dysfunctional Washington among voters and investors.

Congress has rock-bottom approval ratings of around 10 percent after more than a year of budget fights that saw the government pushed to the brink of a shutdown and then to an unprecedented cut in the U.S. credit rating.

Given unusual powers to tackle the government’s budget deficit and debt, which topped $15 trillion on Friday, the committee was seen by many as the best chance in the near term for the United States to get control of its finances.

Some of the 12 panel members were chosen by their parties for deal-making skills and expertise on tax and benefits, while others were chosen for partisan loyalty.

EYE ON 2012

The deadlock comes back to two fundamental differences: Republican opposition to tax increases, particularly on the wealthiest Americans, and Democratic refusal to cut federal retirement and healthcare benefits without such tax increases.

While expectation for a deal was low, with an election year ahead and the ugly debate on the debt ceiling fresh on the minds of many, investors remain concerned about the inability of Congress to compromise.

They fear gridlock may hurt White House efforts to extend a temporary payroll tax cut and jobless benefits for the long-term unemployed, further harming fragile economic growth.

White House officials were conspicuously absent from the Sunday talk shows. Administration officials see little political fallout for Obama if the panel fails and believe there is still breathing room for a deal in coming months since the automatic cuts would not kick in until early 2013.

Those cuts would be evenly divided between domestic and defense programs. But some Republican members of Congress are talking about dismantling the automatic cuts to protect the Defense Department from deep reductions.

Obama has warned Congress he would veto any attempt to block automatic cuts, even though his own defense secretary says the armed forces cannot afford to work with less.

With an eye on the election, many Democrats and Republicans have recently agreed on one thing - no deal is actually better than a bad deal.

They would then enter the campaign period without having betrayed any of their parties’ core principals and could blame the other side for not being willing to compromise.

Some are already positioning to score political points on the super committee. In a fundraising letter sent on Saturday, Democratic House leader Nancy Pelosi said Republicans were thwarting progress on job creation and urged supporters to donate to get more Democrats in office in the 2012 elections.


While many of the super committee members who appeared on Sunday talk shows spoke in the past tense about the talks, the two co-chairs said they had not given up.

“I am ready to work with anybody who can say, that last divide, that they’re willing to cross that,” Democratic co-chair Senator Patty Murray said on CNN.

Democrats say Republicans will not agree to raise taxes on the wealthy to help bring down soaring budget deficits.

Republicans want Democrats to agree to long-term savings in growing costs of federal retirement and healthcare programs.

Murray said Republicans want to extend tax cuts that lowered individual rates - reductions that originated under Republican President George W. Bush. Those tax cuts run out at the end of 2012.

Republicans have pushed for a permanent extension but Democrats want the tax cuts for the rich to expire.

“In Washington, there are folks who will not cut a dollar unless we raise taxes,” said Kyl, sparking an exasperated reaction from Kerry who noted that Congress has cut about $1 trillion from the budget this year without any tax hikes.

Additional reporting by Matt Spetalnick, Lily Kuo and Margaret Chadbourn; Writing by Deborah Charles; editing by Mary Milliken and John O'Callaghan

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