Chances of deficit panel success unclear

Reuters News
Posted: Oct 14, 2011 4:48 PM
Chances of deficit panel success unclear

By Donna Smith and Richard Cowan

WASHINGTON (Reuters) - Whether the special "super committee" of Congress will succeed in its mission to slash U.S. deficits is up in the air, a panel member said on Friday, as some lawmakers tried to fence off large budget items like defense.

Representative Chris Van Hollen, a Democratic member of the special panel, said he was "absolutely convinced" the six Democrats and six Republicans would try hard to reach agreement on a plan by its November 23 deadline. The panel has been asked to find at least $1.2 trillion in savings over 10 years.

"Whether we are able to overcome some of the obstacles by the end of the day is still unclear," Van Hollen said at an event sponsored by the National Journal.

The panel of senators and U.S. House of Representatives members has been meeting, mostly behind closed doors, for more than a month in an effort to put together a deficit reduction package. They have said very little publicly about their deliberations or whether any progress has been made on the politically explosive issues of tax hikes and spending cuts for government healthcare and retirement programs.

During bitter debt limit negotiations that led to an August agreement creating the super committee, Republicans firmly refused to consider Democratic demands that tax increases be part of any package that included spending cuts for Medicare and Medicaid healthcare programs for the elderly and poor.

Some Republicans on the super committee now appear open to the idea of closing some corporate tax breaks to increase revenues and lower corporate income tax rates, according to lobbyists familiar with the discussions.

Van Hollen declined to discuss the tax issues being considered by the super committee. But he said tax code reform is one way to raise revenues.

"One way to address the revenue piece of the puzzle is through tax reform," Van Hollen said. "You can apply that concept equally through the individual side and the corporate side."

While the super committee is unlikely to have enough time to write an overhaul of the tax code, it could instruct the tax-writing committees of Congress to undertake such an effort next year.


The panel is reviewing a large number of budget proposals from the regular committees of Congress.

Most of the committees split along party lines in their suggestions with Democrats urging the super committee to avoid cuts in health and retirement benefits and Republicans urging an overhaul of those programs to put them on a more sustainable financial footing.

Senate Finance Committee Republicans called for a series of tax cuts that they have long advocated and asked the super committee to cap the individual and corporate tax rates at 25 percent. The current top rates are 35 percent.

Democrats meanwhile continued their push for more revenues to relieve pressure on domestic government programs that have shouldered the burden of two previous budget-cutting efforts.

But in a rare show of agreement, Democrats and Republicans on the House Armed Services Committee urged the panel to reject further defense spending cuts. In separate letters to the super committee they argued that such a move would hurt military preparedness as well as the economy.

"If further cuts to the military are implemented ... these cuts would pose a serious threat to the nation's readiness to respond to current and future global security challenges, break the back of our armed forces while slowing our economic recovery, and do little to resolve our debt crisis," said committee Chairman Howard McKeon.

Walling off the military from spending cuts would make the super committee's work an even tougher uphill climb.

Failure by the super committee to reach agreement would trigger $1.2 trillion in spending cuts, starting in 2013, evenly divided between military and domestic programs.

Defense Secretary Leon Panetta told McKeon's panel on Thursday that defense spending cuts beyond the $450 billion over the next decade that lawmakers have already approved would "devastate our national security."

Meanwhile Senate and House agriculture committees, possibly hoping to head off even deeper cuts by the super committee, are expected to propose about $23 billion in farm subsidy reductions. The proposal would be tied to the creation of a new crop subsidy system, according to farm lobbyists.

(Reporting by Donna Smith; Editing Deborah Charles and Jackie Frank)