Despite Broken Talks, Congress May Be Close to Debt Deal

Posted: Jul 05, 2011 7:19 AM
Even after the "Biden talks" broke off last week and the Obama Administration went into attack mode against Republicans, a budget deal may be in the works to raise the debt ceiling. While there may be some fuzzy math involved at this point, the sides are focused on closing a $2 trillion hole over ten years primarily in discretionary spending.

From a dollar standpoint, the two sides are closer to a deal than it might appear.

In talks led by Vice President Joe Biden, negotiators had agreed to reduce discretionary spending, which covers everything from space exploration to pollution control, by between $900 billion and $1.7 trillion over 10 years.

Republicans resisted cuts to military and other security spending sought by Democrats, but Senator Charles Schumer, a Democrat known as a hard-nosed partisan, said on Thursday he thought a compromise was possible in this area.

What's more, the Obama Administration has revealed an openness to including small entitlement program reforms in the deal.

Administration officials and Republican negotiators say the money can be taken from health care providers like hospitals and nursing homes without directly imposing new costs on needy beneficiaries or radically restructuring either program.

Before the talks led by Vice President Joseph R. Biden Jr. broke off 12 days ago, negotiators said, they had reached substantial agreement on many cuts in the growth of Medicare, which provides care to people 65 and older, and Medicaid, which covers lower-income people. Those proposals are still on the table when Congress reconvenes this week, aides said, and are serious options that Democrats could accept in exchange for Republican concessions that raise revenues.

Now, I'm seriously skeptical of the viability of reforming health care entitlement programs in a time-crunch emergency budget deal. These kinds of talks lead to "cuts" like the infamous "doc fix," a scheduled cut in doctor reimbursements that actually gets un-cut every single year.

Because of the nature of these budget talks, any deal that comes out may have very simple cuts in entitlement programs. And the Republicans, led by Rep. Paul Ryan, know that it's not just about the dollar amount that Medicare and Medicaid spend; it's about the entire structure of these programs. It's unlikely to get the kind of reform that Ryan says we need to keep these programs solvent in this debt deal. But this all will set the stage for a real budget fight to take place later, and the Republicans look to be acquitting themselves pretty well so far.