CQ TODAY ONLINE NEWS
June 17, 2011 – 9:54 p.m.
Debt Negotiators Look for a Deal That Can Pass
By Joseph J. Schatz, CQ Staff
White House and congressional negotiators enter their eighth week of debt reduction talks, aiming for a tentative deal by July 1, as they continue to struggle over how to resolve the parties’ two most difficult philosophical divides: taxes and entitlements.
Both sides know that even if they reach a bipartisan deal to pave the way for a debt ceiling increase, they still will have a sales job to do with their respective caucuses. And they are mindful, if not fearful, of a repeat of the initial rejection of a different but similarly fraught deal — to bail out the teetering financial industry — nearly three years ago.
That is why, according to Vice President
“We’ve been appointed by the leadership because we know the principals for whom we speak,” Biden told reporters last week.“We are in constant contact with one another and we’re being honest in assessing to one another, ‘Let me tell you, this is as much as the traffic will bear on my street.’ ”
Whether that yields a broad agreement that satisfies the government’s borrowing needs through 2012, as desired by many stakeholders, or some sort of shorter-term deal, remains to be seen. Biden is expected to meet with the six lawmakers appointed by congressional leaders — as well as Treasury Secretary
He has promised “around -the-clock” staff work, in hopes of producing a package by early July, giving Congress time to act on legislation before the Aug. 2 deadline, which is when Geithner says the government would risk default without an increase in the $14.3 trillion debt ceiling.
Echoes of TARP
At this point, any potential deal on spending, entitlements and revenue seems likely to be packaged with a debt limit increase in one large bill, rather than weave its way through the committee process.
And the reality is that any final deal will need bipartisan support, given that some House Republicans appear unwilling to vote for a debt limit increase under any circumstances and some Democrats are likely to abandon any proposal that seriously cuts domestic spending.
Congressional leaders are heeding history — some aides and lawmakers have compared the impending debt showdown to the 2008 House vote on the $700 billion financial industry bailout, known as the Troubled Asset Relief Program (TARP). With President George W. Bush’s Treasury secretary, Henry M. Paulson, warning of an imminent financial meltdown, Republican and Democratic leaders forged a late-night weekend deal — only to see the highly unpopular legislation go down to defeat in the House two days later, sparking a huge stock market drop.
Days later, the House approved the bailout with support from a coalition of Democrats and Republicans — with many conservatives continuing to vote “no” — after Senate Democrats added a package of tax cut extensions.
With the White House predicting a similarly calamitous outcome if the government defaults on its debts, each party’s leaders are approaching the negotiations and the ultimate vote carefully. House Republican leaders have been holding “listening sessions” with members, and Senate Majority Leader
Spending, Revenue, Entitlements
Debt Negotiators Look for a Deal That Can Pass
Getting to a final deal will hinge on big decisions on entitlements and taxes. Democrats are open to relatively small changes to Medicare and Medicaid — but may balk if Republicans refuse to come to the table on taxes and support some form of increased revenues. Given last week’s overwhelming Senate vote in favor of repealing an ethanol tax credit, the most likely path to boosting revenues appears to be some reduction in tax expenditures.
But House Republican leaders have publicly ruled out tax increases. Agreeing to eliminate some tax expenditures outside a more comprehensive tax code overhaul would court opposition from outside groups such as Americans for Tax Reform, which has been quick to put the tax increase label on reductions in tax benefits. It would require a careful sales job, persuading wary conservatives that they could escape charges of being tax raisers.
Members of the negotiating group claim to have reached some tentative agreement on spending reductions across much of the federal budget, which probably means most domestic discretionary programs and mandatory accounts like farm subsidies. But those also will require careful political navigation; every program has strong advocates likely to fight proposed cuts. Agriculture Chairwoman
Pressure From Many Sides
Members of the Biden group have been able to keep everybody’s powder dry, in part by being extremely secretive about their talks.
Senate Finance Chairman
Biden says the group needs a deal that will satisfy short-term political pressure on the debt limit, but also reassure international investors that the White House and Congress are serious about, and capable of, real debt reduction.
Senate Budget Chairman
That plan probably would not move with a debt limit increase, Conrad said. But he said it “could influence the leadership talks and hopefully embolden them to do more than I fear they’re currently intending to do.”
Paul M. Krawzak contributed to this story.