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May 18, 2011 – 9:34 p.m.

$150 Billion Down, Trillions to Go

By Brian Friel, CQ Staff

Deficit reduction negotiators are searching for trillions of dollars in budget cuts that can attract bipartisan support beyond the roughly $150 billion the group has so far identified during Blair House talks.

The leadership-level talks led by Vice President Joseph R. Biden Jr. will resume May 24, when participants pick up their effort to agree to a deficit reduction package the Senate and House can pass along with an increase in the nation’s $14.3 trillion debt limit. The goal is to do that by the Aug. 2 deadline set by Treasury Secretary Timothy F. Geithner to ensure that the nation does not default on its debt obligations.

The Biden group became the center of attention after the breakdown this week of deficit reduction negotiations by the bipartisan group of senators known as the“Gang of Six.”

The Biden group found some $150 billion in reductions that both sides are likely to support. Tougher decisions involving changes in entitlement programs may be necessary for the group to reach multitrillion-dollar savings.

“That’s the ballpark we’re in right now,” Minority Whip Jon Kyl, the Senate Republicans’ representative in the talks, said earlier this week. “We all recognize we have to do a lot more than that.”

Kyl, of Arizona, said the group identified fairly easily about $100 billion in savings that “overlap” in budget proposals offered by House Republicans and President Obama and then found $50 billion or so beyond that.

With the House in recess this week, staff-level negotiations are continuing until the group’s next meeting. The group consists of Biden, Kyl, Senate Appropriations Chairman Daniel K. Inouye, D-Hawaii, Senate Finance Chairman Max Baucus, D-Mont., House Majority Leader Eric Cantor, R-Va., ranking House Budget member Chris Van Hollen, D-Md., and House Democrats’ Assistant Leader James E. Clyburn of South Carolina.

“We remain optimistic about the progress that those talks have made so far, and we look forward to greater progress being made when they resume,” White House Press Secretary Jay Carney said May 17.

Process to Expedite

Senate Majority Leader Harry Reid, D-Nev., suggested May 17 that a process for the deal has been struck: The Senate would take up such an agreement in the form of a budget resolution and then ship it back to the House for adoption.

Such a procedure would allow the Senate to pass the resolution with 51 votes rather than the 60 needed to overcome procedural obstacles.

“Ultimately, when something is decided on a bipartisan basis that we need to move forward, the way we have to go is with a budget resolution that will begin here in the Senate,” Reid said.

This scenario opens the possibility that the two chambers will use budget reconciliation procedures for passage of elements of the deal. Legislation advanced under reconciliation rules is considered under fast-track procedures and cannot be filibustered, allowing for Senate approval with a simple majority.

$150 Billion Down, Trillions to Go

Negotiators are working toward a target of reaching $4 trillion in budget savings over the next 10 to 12 years.

Hundreds of billions of dollars in savings could come from caps on discretionary spending — an idea endorsed by Senate Minority Leader Mitch McConnell, R-Ky., and Kyl.

Budget resolutions always carry discretionary spending caps, and because of that Reid’s suggestion that the deal be folded into a fiscal 2012 budget resolution adds further weight to the idea that discretionary caps are likely to become part of any final deal.

In the fiscal 2012 budget resolution the House adopted April 15 (H Con Res 34), Republicans proposed a $1.019 trillion cap for fiscal 2012 spending, $72 billion less than the $1.091 trillion provided for fiscal 2010, as scored by the Congressional Budget Office.

“You could conceivably find a middle ground there,” said David Kendall, a senior fellow at Third Way, a think tank aligned with moderate Democrats.

Variety of Ideas

Other budget savings could be realized under a proposal — endorsed by Third Way — to boost federal employees’ contributions to their pension plans, an idea that House Republicans also included in their budget blueprint and that appears likely to become part of the deficit reduction package the Biden group is working on. Obama’s fiscal commission also endorsed the idea as part of the budget-cutting proposal it released last December.

The change would generate between $65 billion and $120 billion in savings, depending on how high the contributions are set, according to an analysis by the independent Committee for a Responsible Federal Budget.

Other ideas endorsed by House Republicans and Obama include cutting federal agriculture subsidies, which could generate up to $30 billion in savings, revising the federal Pension Benefit Guaranty Corporation’s financing, which could save $5 billion to $10 billion, cutting some student-aid subsidies for an additional $20 billion to $65 billion and selling unused federal property, generating up to $15 billion more.

Kyl said the negotiators have not yet discussed health care programs — the largest area of costs in the federal budget. Efforts to overhaul the medical liability system have been endorsed by Obama and Republicans. Such a change could reap savings of up to $60 billion.

Michael D. Crapo, R-Idaho, a Gang of Six member, said the final package is likely to draw from the recommendations of Biden’s group and from ideas by various individual lawmakers.

For example, Oklahoma Republican Tom Coburn, who parted ways with the Gang of Six earlier this week in a dispute over the depth of entitlement cuts, said Wednesday he would introduce his own budget plan in the next month. It would propose $9 trillion in debt reduction over 10 years, Coburn said.

“Senators and all the congressmen and the White House are always talking among each other, and there are groups negotiating and there are individuals developing bills,” Crapo said. “It’s the political process that always works this way around here.”

$150 Billion Down, Trillions to Go

Senators also are proposing various changes to government operations that could yield billions in savings. Cutting down on improper payments and eliminating duplicative programs also have been proposed.

A recent Government Accountability Office report identified duplication in 81 federal operations that could be consolidated, potentially savings tens of billions of dollars.

Coburn and Mark Warner, a Virginia Democrat who also is a member of the Gang of Six, have sponsored legislation that would direct the Obama administration to come up with $5 billion in savings by consolidating redundant programs. The proposal garnered 64 supporters during an April 6 Senate vote as an amendment to a small-business research bill (S 493) that ultimately stalled for unrelated reasons.

The Homeland Security and Governmental Affairs Committee has scheduled hearings May 25 to examine improper payments and duplicative programs.

The Blair House negotiations give leaders a rare opportunity to ditch programs that enjoy the support of individual lawmakers or small groups of them but that leaders privately are willing to cut. Kyl called them “things that neither party wants to have any fingerprints on.”

Joseph J. Schatz contributed to this story.

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