Super Congress Has Until November 23 to Forge a Deficit-Reduction Deal; If They Fail, Spending Cuts Will Be Divided Equally Between Domestic and Defense Programs, and Would Automatically Begin in 2013

Defense Cuts Spat Clouds Deficit Panel Debate

September 8, 2011

Reuters - On the first day of work on Thursday for a "super committee" charged with finding $1.2 trillion in new government savings, a member of the panel threatened to quit if defense spending cuts are discussed, underscoring the difficulties ahead.

Despite Republican Senator Jon Kyl's surprise disclosure after the panel's inaugural meeting that,

"I'm off of the committee if we're going to talk about further defense spending," other Republicans worked to put comprehensive tax reform squarely on the agenda and urged bipartisanship.

A broad revamp of the U.S. tax code, which hasn't been done in 25 years since the Reagan administration, could include lowering corporate tax rates, eliminating special-interest tax breaks, and raising taxes on the wealthy.

Besides streamlining tax law, lawmakers hope it will help boost revenues, encourage corporate investment and create new jobs.

Kyl's threat overshadowed the tax initiatives and came as many lawmakers were hoping to put their bickering aside, having attacked each other all year over budget priorities amid annual deficits topping $1 trillion.

Democratic Senator Patty Murray, a co-chair of the super committee, applauded her colleagues' early show of bipartisanship, saying,

"Committee members have refrained from drawing lines in the sand or carving out areas that can't be touched."

That quickly changed when Kyl, speaking to some conservative think tanks immediately following the panel's hour-long meeting, said he wouldn't tolerate any more cuts to defense. It was reminiscent of Republican demands in earlier budget talks that tax increases be off the table.

U.S. spending on security programs, including defense, was cut by $350 billion as part of a $917-billion deficit-reduction plan enacted last month. But Republicans were devising ways for the Pentagon to escape much of those cuts with diplomatic and foreign aid programs shouldering most of the pain.

TACKLING TAX REFORM

The 12 congressional Democrats and Republicans serving on the super committee have until November 23 to forge a deficit-reduction deal that a majority can support. If they fail, about $1.2 trillion in spending cuts over 10 years, divided equally between domestic and defense programs, would automatically begin in 2013.

Democrats say they want a "balanced" package of spending cuts and tax increases, while Republicans want to tackle the fast-rising costs of popular benefit programs such as Medicare and Medicaid healthcare for the elderly and poor and the Social Security retirement program.

One way to address both could be to revamp the U.S. tax code, which is widely seen as too complicated and riddled with loopholes. With broad tax reform, lawmakers might be emboldened to also rein in benefit programs.

"Comprehensive tax reform would spur economic growth and job creation and should be part of our discussions," said Republican Representative Dave Camp, who also chairs the tax-writing House Ways and Means Committee.

But Camp's Senate counterpart, Finance Committee Chairman Max Baucus, a Democratic member of the super committee, injected a political reality.

While he agreed that the panel should look at broad tax reform, he noted the super committee's "short period (for working out a deficit deal) just makes it difficult."

David Kendall, senior fellow with the centrist think tank Third Way, said Thursday's developments underscored that,

"The two hot issues for Republicans are defense cuts and tax reform."

He added, "They're trying ... to get control of the debate" by crowding out Democrats' hopes for some targeted tax hikes and replacing them with debate about broad tax reform.

Many congressional aides confide, however, that rewriting the tax code in the next 10 weeks is virtually impossible.

Republicans on the super committee also could feel vulnerable to attacks from conservative Tea Party activists if they end up embracing more defense cuts in a new budget deal.

As union-backed protesters chanted for jobs and briefly interrupted the super committee's meeting, Democrats on the panel said deliberations should not focus on deficit-reduction at any cost.

Representative James Clyburn, a liberal Democrat, said that,

"Debt and deficit reduction should be intertwined into a strong code of job creation, budget cuts and tax reform."

Factbox: Deficit Super Committee's 12 Members

September 8, 2011

Reuters - The U.S. Congress' "super committee" on deficit reduction is set to meet on Thursday for the first time, with financial markets watching closely to see if its 12 members can do anything meaningful.

The panel has the job of finding at least $1.2 trillion in government budget savings over the next decade, following up on $917 billion in deficit reduction agreed in August. Committee members can use budget cuts and tax changes in their effort.

They have until November 23 to achieve their objective -- or something close to it. Then Congress will have until December 23 to vote on the panel's recommendations. If either deadline goes unmet, then automatic budget cuts are triggered in 2013.

Here is a list of the six Democratic and six Republican lawmakers on the super committee.

SENATE DEMOCRATS

MAX BAUCUS: A centrist leader known for working across party lines, Baucus is chairman of the powerful Senate Finance Committee. He has been a proponent of tax reform.

He was a member of President Barack Obama's 2010 Bowles-Simpson deficit commission that offered up $4 trillion in savings through spending cuts and revenue increases. He opposed the final Bowles-Simpson plan because it would have cut benefits for veterans and the elderly and hurt his largely rural home state of Montana by raising gasoline prices.

Baucus fought former President George W. Bush's push to privatize the Social Security retirement program. He is a vocal critic of a House of Representatives Republican plan to privatize Medicare, the health insurance program for the aged.

JOHN KERRY: The failed 2004 Democratic presidential candidate, Kerry is chairman of the Senate Foreign Relations Committee and a Finance Committee member.

Kerry, who is from Massachusetts, has been outspoken in calling for long-term remedies for annual budget deficits and the growing national debt. But he also wants large U.S. investments in infrastructure -- to rebuild crumbling roads and bridges and to create jobs. He wants to do so with minimal government spending by creating a bank to help finance the projects with a revolving fund.

PATTY MURRAY: Named by Senate Majority Leader Harry Reid to be co-chair of the super committee, Murray, of Washington state, is a member of the Senate's Democratic leadership and chairs a political committee that works to elect more Democrats to the Senate. In 2013, she is in line to be the senior Democrat on the Senate Budget Committee.

SENATE REPUBLICANS

ROB PORTMAN: A first-term senator from Ohio, Portman knows budget and tax issues after working in the Bush administration as director of the Office of Management and Budget. When he was in the House, Portman served on both the Budget and the tax-writing Ways and Means Committees.

JON KYL: The No. 2 Senate Republican, Kyl, of Arizona, does not plan to run for re-election next year. In the debt limit debate, he was a strong voice against raising taxes. He would be a tough negotiator on the super committee.

PATRICK TOOMEY: He is a favorite of the conservative Tea Party movement that wants to shrink the federal government. Toomey accused Obama administration officials of exaggerating the risk of default if Congress failed to raise the debt ceiling. He rejects administration calls for tax increases and likely will take a hard line on the need for further government spending cuts. Toomey is in his first term as a senator from Pennsylvania.

HOUSE REPUBLICANS

DAVE CAMP: The chairman of the House Ways and Means Committee wants to balance the budget without raising taxes. This is a key Republican goal and one that most fiscal policy experts say cannot be met without devastating budget cuts.

Camp has said the super committee would not be the best forum for comprehensive tax reform.

He was on the Bowles-Simpson panel and opposed its final recommendations, which he said failed to address rising healthcare costs and included tax increases that would impede economic growth. In a Reuters interview in early August, Camp, of Michigan, would not rule out tax increases that enabled economic growth.

JEB HENSARLING: As a conservative House Republican, he has pushed for a moratorium on funding designations by lawmakers, known as earmarks, and proposed capping federal spending at 20 percent of the size of the U.S. economy every year.

A Bowles-Simpson member, he opposed its recommendations. The Texan is a co-chair of the super committee.

FRED UPTON: In his 13th two-year term representing a southwest Michigan district, Upton is chairman of the House Energy and Commerce Committee. For most of his career in the House he compiled a moderate voting record. But he has tacked rightward lately, working against Obama administration efforts to rein in greenhouse gas pollution blamed for global warming.

HOUSE DEMOCRATS

XAVIER BECERRA: A rank-and-file party lieutenant, the vice chairman of the House Democratic Caucus sits on the tax-writing Ways and Means Committee. He is close to fellow Californian and Democratic leader Nancy Pelosi. He was on the Bowles-Simpson panel and opposed its final report. A solid liberal, Becerra has ties to the White House. At the start of Obama's presidency, he was offered the job of U.S. trade representative but turned it down.

CHRIS VAN HOLLEN: Another party stalwart, the top Democrat on the House Budget Committee was part of a bipartisan group led by Vice President Joe Biden that tried unsuccessfully earlier this year to forge a deficit deal. From Maryland, Van Hollen is former chairman of the House Democratic Campaign Committee and is a Pelosi confidant.

JAMES CLYBURN: The senior member of the South Carolina delegation to Congress, he is the No. 3 House Democrat and a Pelosi ally. Clyburn also is an influential member of the Congressional Black Caucus.