Republican and Democratic lawmakers on the deficit-cutting supercommittee said they’re still aiming for a last-ditch agreement even as one of the panel’s leaders voiced doubts about an accord by a Nov. 23 deadline.
The supercommittee faces a “daunting challenge” as its 12 members seek to bridge gulfs over taxes and spending, Rep. Jeb Hensarling of Texas, the Republican co-chairman, said today. Time is running out for a plan to carve at least $1.2 trillion out of the federal budget, he said.
The panel has been deadlocked over income-tax increases, with Democrats seeking tax increases on high earners while Republicans push for extending President George W. Bush’s tax cuts. Another sticking point is Republican calls for cuts, over Democrats’ opposition, in entitlement programs such as Medicare.
‘Nobody wants to give up hope,” Hensarling said on the “Fox News Sunday” Program. “Reality is, to some extent, starting to overtake hope.”
Sen. Pat Toomey, a Pennsylvania Republican and supercommittee member, said the “silver lining” in a failure to agree is that there will still be $1.2 trillion in automatic, across-the-board budget cuts in 2013. That process, called “sequestration,” is designed to spare the U.S. from another credit downgrade.
Senator John Kerry, a Massachusetts Democrat and supercommittee member warned of potential risk of a downgrade of the U.S. credit rating if the group can’t come together and if lawmakers skirt the $1.2 trillion in across-the-board cuts that are mandated starting in 2013 if there is an impasse.
“There is a real threat that not only will there be a downgrade but that the market on Monday look again at Washington and say, you guys can’t get the job done,” Kerry said on NBC’s “Meet the Press” program. “And just the political confusion, the gridlock, is enough to say to the world that America can’t get its act together.”
After Standard & Poor’s downgraded the U.S. AAA debt on Aug. 5, the government’s borrowing costs fell to record lows as Treasuries rallied. The yield on the benchmark 10-year Treasury note fell from 2.56 percent on Aug. 5 to below 1.72 percent on Sept. 22. The yield on the 10-year note was at 2.01 percent at 5:14 p.m. on Friday, Nov. 18, in New York, according to Bloomberg Bond Trader prices.
Senator Jon Kyl of Arizona, the No. 2 Senate Republican leader and a supercommittee member, said on “Meet the Press” that the $1.2 trillion in automatic cuts should occur, though Republicans would look for an “opportunity to work around” those reductions. He said that would include easing the cuts in Pentagon spending.
“There is a way to avoid that if there’s good will on both sides,” he said of Pentagon cuts he described as “Draconian.”
Hensarling said he hoped the across-the-board cuts required if no deal is reached would be altered to spare defense. Congress, he said, will have 13 months to make sure the reductions happen “in a smarter, more prudent fashion.”
If the supercommittee fails, he said, “the American people are still going to get the deficit reduction that was contemplated under the law, but it is a huge blown opportunity.”
Although the deadline for a committee-approved agreement is Nov. 23, under panel rules a Congressional Budget Office cost estimate of any final plan must be publicly available 48 hours beforehand. Congressional leaders have discussed a smaller “fallback” plan for the committee to weigh, but Democrats on Nov. 17 rejected a $643 billion proposal by House Speaker John Boehner that included $3 billion in revenue increases.
Both Kerry and Sen. Patty Murray of Washington, the supercommittee’s Democratic co-chairwoman, insisted that Democrats have been willing to make some cuts to entitlement programs, which include Social Security, Medicare and Medicaid. Kerry said a deal that includes some entitlement and other domestic cuts could be reached “in the next two hours” if Republicans will drop a push for an extension of the Bush tax cuts and boost revenue.
“There is one sticking divide, and that is the issue of what I call shared sacrifice where everybody contributes in a very challenging time for our country, and that’s the Bush tax cuts and making sure that any kind of package includes everybody coming to the table, and the wealthiest of Americans, those who earn over $1 million every year, have to share, too,” Murray said on CNN’s “State of the Union” program. “That line in the sand, we’ve haven’t seen any Republicans willing to cross yet.”
Kyl said Republicans have already offered to increase revenue by $300 billion as part of a broad tax overhaul. He said that compromise was “a big step for Republicans” who oppose tax increases. He also restated the case against raising taxes in a struggling economy.
“You can’t grow if you raise taxes in the middle of a recession,” Kyl said.
Representative Xavier Becerra, a California Democrat and panel member, said the CBO has already seen enough portions of what’s under discussion that it could do its work quickly. That could buy more time to bridge policy differences and reach accord, he said.
“The Congressional Budget Office, which has to score this plan, has essentially seen all the different elements,” he said on “Fox News Sunday. “It’s better to do this the smart way then to have some sequestration process decide through automatic triggers.”
Asked whether Republicans would put forward a new offer to get a deal before the deadline, Hensarling said members of his party were willing to work on any of the “multiple frameworks” they had put on the table already.
“If there is no agreement, the nation is still going to end up with what Republicans said, and that is there will still be a dollar of spending reduction for every dollar increase in the debt ceiling,” he said.
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