Subcommittee Reps Dig in Heels Along Party Lines

Representative Jeb Hensarling of Texas, the panel’s Republican co-chairman, said yesterday that his party won’t go beyond its offer to increase tax revenue by $300 billion to cut the debt until Democrats offer a plan to address the long-term growth in federal spending on entitlement programs such as Medicare.

“I’m not moving this particular offer,” Hensarling told reporters. “I’m still waiting for Democrats to actually solve the problem” of entitlements.

“Should that come, I would be more than willing to negotiate,” he said.

The supercommittee’s Democratic co-chairwoman, Senator Patty Murray of Washington, said members of her party “are not going to accept a plan that gives a tax break to the wealthiest Americans and balances all of this incredible challenge we have on the backs of middle-class Americans.”

Pressure is mounting for both parties to agree on a proposal so the committee can vote by its Nov. 23 deadline. Failure to enact by year’s end a plan that would cut at least $1.2 trillion over the next decade would force that amount in automatic spending cuts beginning in 2013. Democrats oppose reductions in entitlement programs such as Medicare, as sought by Republicans, unless Republicans agree to larger increases in tax revenue.

‘Pull Something Out’

“I’ve said all along that I think there’s a better than 50 percent chance that these guys get their $1.2 trillion done,” U.S. Representative Jim Himes, a Connecticut Democrat, said in a Bloomberg Television interview today. “The automatic cuts, the sequesters that kick in, they’re pretty brutal, so my guess is that these guys are going to pull something out to avoid those sequesters.”

The committee must present a plan for a cost analysis by the end of the day Nov. 21 to be able to vote on Nov. 23, Hensarling said yesterday, adding: “I’m not giving up hope until that stroke of midnight.”

Offer by Democrats

Two Democratic aides said their party made an offer on Nov. 11 accepting what they said was an overall Republican proposal for $876 billion in spending cuts and $401 billion in new tax revenue, with several changes.

The aides, who weren’t authorized to speak publicly, said their party suggested dropping Republican proposals to raise the Medicare eligibility age and change an inflation formula so that Social Security benefits would grow less quickly.

Democrats also sought to add money to help create jobs and to bar any permanent extension of income tax cuts enacted under President George W. Bush. Republicans haven’t responded, the Democratic aides said.

The Democratic plan is “a step backwards because it would lock in the largest tax hike in history -- at least $800 billion -- and add an additional $400 billion in job-killing tax hikes without pro-growth tax reform, plus more than $300 billion in stimulus spending,” Michael Steel, spokesman for House Speaker John Boehner, an Ohio Republican, said in a statement.

Earlier Plan

Earlier last week, Democrats proposed a plan that would include $1 trillion in new revenue, $1 trillion in spending cuts and $300 billion from interest savings.

Hensarling called on President Barack Obama to withdraw a September threat to veto any supercommittee deal that cuts Medicare benefits and doesn’t include significant revenue.

“His veto threat has been widely interpreted to mean there can be no reforms of our unsustainable Medicare and health-care spending unless attached to a trillion-dollar tax increase,” said Hensarling. “He should either clarify that veto threat or withdraw that veto threat.”

Josh Earnest, a White House spokesman, responded in a statement by saying that “the president has long insisted on a balanced approach -- something that has broad support among the American public.”

Some lawmakers had hailed Republicans’ offer last week for $300 billion in tax increases as a breakthrough demonstrating new support in the party for higher taxes. After Democrats rejected the plan, talks stalled.

The question is whether Republicans have “said ‘take it or leave it’ and don’t want to negotiate,” said Representative Chris Van Hollen of Maryland before meeting with fellow Democrats on the supercommittee.

‘Darkest Before a Deal’

When there’s still time to talk, an agreement is possible, New Hampshire Republican Senator Kelly Ayotte said. “As you know in Washington, it’s always darkest before a deal,” she told the U.S. Chamber of Commerce in Washington. “What you see right now with the back and forth, there is still time to work this out.”

A bipartisan group of senators and House lawmakers reiterated their call for the panel to “go big” with a deal of as much as $4 trillion.

“The seriousness of the debt challenge can only be met with an equally serious and bipartisan determination to do what needs to be done,” House Minority Whip Steny Hoyer, a Maryland Democrat, said at a news conference. Dozens of lawmakers joined him, including Senator Lamar Alexander of Tennessee, his chamber’s No. 3 Republican leader, and Senator Richard Durbin of Illinois, the No. 2 Democratic leader.

Alexander suggested he is willing to accept more tax revenue than Hensarling offered. Noting that Republicans have offered more revenue and Democrats have offered to reduce entitlements, he said, “Both need to put more on the table and get a result, and we’re here to support them.”

Senator Pat Toomey, a Pennsylvania Republican on the supercommittee, outlined his party’s plan last week and said Nov. 13 on “Fox News Sunday” that he was open to compromise. The Republican proposal would reduce the top income tax rate for the highest earners to 28 percent from the current 35 percent.

--With assistance from Richard Rubin, Brian Faler, James Rowley, Roxana Tiron, Peter Cook, Steven Sloan, Laura Litvan and Roger Runningen in Washington. Editors: Laurie Asseo, Jim Rubin.

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net