June 16, 2011 / 7:25 PM / 7 years ago

WRAPUP 1-Biden group looks for common ground in debt talks

* Biden group seeks to nail down areas of agreement

* Medicaid health plan could see significant cuts

* Farm subsidies, defense cuts also possible

By Andy Sullivan

WASHINGTON, June 16 (Reuters) - Negotiators trying to tame the United States’ spiraling debt could get a better sense on Thursday of whether they can reach their goal of trillions of dollars in budget savings.

Vice President Joe Biden and top Democratic and Republican lawmakers are due to meet at 4 p.m. (2000 GMT) in the Capitol to assess their progress after several weeks of talks.

The group will try to nail down areas where it has found common ground despite a deep partisan divide over taxes and health benefits. The divide is blocking a deficit-cutting deal that would pave the way for lawmakers to raise the $14.3 trillion U.S. debt ceiling to prevent a default.

“We’re focused on trying to define where we can agree to get some, as the vice president likes to say, some granularity as to the actual cuts and reforms we’re looking for,” Representative Eric Cantor, the No. 2 Republican in the House of Representatives, told reporters.

Cantor and other negotiators hope to pull together a deal by the end of the month that would give Congress the political cover to back an increase in the government’s borrowing authority in the face of widespread voter concern about budget deficits.

U.S. deficits are at their highest level relative to the economy since World War II. The deficit for the fiscal year that ends Sept. 30 is expected to hit $1.4 trillion.

The Obama administration has warned that it will run out of money to pay the nation’s bills if Congress doesn’t raise the debt limit by Aug. 2 -- a prospect that could push the country back into recession and upend financial markets across the globe.

Republicans are pushing for at least $2 trillion in cuts, measured over 10 years, to go along with a similar increase in the debt ceiling to ensure Congress doesn’t have to revisit the politically toxic issue before the November 2012 elections.

But the group remains deadlocked over two areas that could provide the biggest budget savings. Republicans say they won’t back any tax increases, while Democrats say they won’t reduce health benefits for retirees under the Medicare program. The cost of the program is projected to nearly double over the next 10 years.


Still, the group has found some common ground. Farm subsidies and retirement benefits for federal workers could be cut, and President Barack Obama recently told Republicans he would support limiting medical malpractice lawsuits -- a longtime Republican priority. Student loan subsidies could be scaled back as well.

Though Democrats do not back the deep cuts to annual spending that Republicans have proposed, they do support a five-year freeze that could save roughly $500 billion. Both sides also back cuts to military spending that could save roughly $180 billion.

And while Democrats won’t consider significant changes to Medicare, the Medicaid program for the poor could see significant cuts. A Republican proposal that has passed the House would give states more control over how it is run and scale back federal payments by roughly one-third, saving $771 billion over the coming 10 years.

Obama has proposed saving $100 billion by streamlining the formula by which federal payments are handed out to states and encouraging more efficiency.

Democratic Representative Rob Andrews said additional savings could come by moving healthy low-income people from Medicaid to private insurance under the new healthcare law.

Democrats also hope to save money by using the government’s purchasing power to negotiate lower costs for prescription drugs.

Additional savings could come by better managing care for the fraction of Medicaid patients who rack up the highest costs, and increasing the amount participants pay to discourage overuse of medical services.

Still, the Biden group could lose the support of many Democrats if it cuts too much from Medicaid.

“I don’t think the majority of Democrats will accept huge cuts in Medicaid,” Democratic Representative Bill Pascrell told reporters. “If it’s part of the mix, we’ll see how much a part of the mix it is.” (Editing by Cynthia Osterman)

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