10.26.11

Debt-Panel Stalemate

In secret negotiations, Republicans rejected a Democratic plan to cut $3 trillion in debt because of taxes. Patricia Murphy on the party-line fight behind closed doors.

When Democrats and Republicans on the debt-reduction “supercommittee” met for the third time in public Wednesday, they sat stone-faced, perhaps an indication of the sour state of their attempt to slash the budget deficit.

One by one, they peppered Budget Director Doug Elmendorf with questions about the past sins of federal spending by the other party and what effect they have had over the years.

But no member of the panel mentioned the Republicans' rejection the day before of a deal pitched by Democrats to slash the budget by roughly $3 trillion through a combination of cuts to Medicare and Medicaid, along with changes to the tax code that would reportedly have raised more than $1 trillion toward deficit reduction. In addition to the tax hikes, which GOP members have repeatedly called a nonstarter for negotiations, Democrats had folded in billions of dollars of new stimulus spending for job creation—another Republican deal breaker—into the plan. Not surprisingly, Republicans reportedly dismissed the Democrats’ proposal out of hand.

News of the Democrats’ offer, confirmed to The Daily Beast, was the first nugget of specific information to have come out of the notoriously secretive committee in the nearly three months since it was created as a part of the tortured debt-ceiling compromise deal that Congress hammered out in August.

Although the panel is empowered to slash at least $1.2 trillion from the federal budget over the next 10 years—inaction would trigger an equal amount of across-the-board spending cuts—virtually nothing has been known about what the six Democrats and six Republicans are tackling in their search for cuts to federal spending and a possible rewrite of the tax code.

In a city full of professional pundits, leakers, and speech givers, the 12 members of the Joint Select Committee on Deficit Reduction had been playing against type, keeping reporters, lobbyists, and other members of Congress in the dark about their deliberations.

The little that had been known about the committee’s proceedings until Wednesday had come not from its three public hearings, where just two witnesses have testified on projections for the federal budget, but from what could be gleaned from the comings and goings of members shuttling between at least seven closed meetings of the full committee and dozens of side meetings between smaller groups, including sessions with Senate Majority Leader Harry Reid.

With less than 30 days left until the panel’s Nov. 23 deadline to produce and approve a plan, people with knowledge of the talks say the now-familiar stalemate over tax increases that stalled the debt-ceiling deal and budget negotiations is bogging down the supercommittee as well.

Although Democrats and Republicans all say they’re open to tax reform, Democrats showed with their offer Tuesday that they want some revenue raised through changes to the tax code. But Republicans have insisted that tax reform be revenue-neutral and keep tax increases off the table—insisting that tax cuts, especially for businesses, will stimulate the economy and increase revenue overall.

If Congress fails to approve a plan from the committee by Dec. 23, $1.2 trillion in across-the-board cuts will automatically kick in, starting in 2013. But that scenario, known as “sequestration,” is apparently becoming more attractive to the 523 members of Congress who aren’t on the committee and are getting more than a little frustrated to be watching the process from the outside.

“You’re starting to hear rumblings that House Democrats say they don’t care what the deal is, we’re taking sequestration,” a veteran Democrat says. “That’s the vibe out of the House.”

Sen. Tom Harkin (D-Iowa) told C-Span in a weekend interview that the process has a better shot at success if the supercommittee produces nothing and committee chairmen, like him, have more of a role in shaping the cuts.

“If it’s just 12 people, nobody else has ownership in that,” Harkin said. “But if you go through the legislative process and the committee chairs and committee members get involved, then they have some ownership of it and it has a much better chance of succeeding.”

A third option raised by staff to committee members would have the supercommittee recommend some budget cuts and then give instructions to the regular committees in Congress to come up with the rest of the $1.2 trillion.

Anxiety in the Capitol is mounting as time ticks by with no tangible signs of progress and two outside forces weigh heavily on members on and off the committee. The first is Congress’s ever-falling approval rating, due lately to its apparent inability to get anything done. With several vulnerable moderates up for reelection in 2012, Reid and committee co-chair Sen. Patty Murray (D-Wash.) are said to be eager to give their members a bipartisan agreement they can support before facing voters next November.

The second cloud looming over Congress is the threat of another financial downgrade, after a warning from the ratings agencies this summer that they wanted to see Congress achieve significant debt reduction before the end of the year.

“You’re starting to hear rumblings that House Democrats say they don’t care what the deal is, we’re taking sequestration.”

With so few specifics known about the deliberations, interest groups, transparency advocates, and even members of Congress are crying foul over the unprecedented level of secrecy surrounding the talks.

Sen. Dean Heller, the newly appointed Republican from Nevada, introduced a bill last month to force the committee to meet only in public. “We cannot allow this committee to dissolve into a supersecret committee—its responsibility is much too great,” he said.

Heller’s stranger-than-strange bedfellow on the issue is Rep. Maxine Waters (D-Calif.), who wants the supercommittee dissolved entirely. She called the committee “an illegitimate shell game” when she introduced her bill to repeal the budget act that created the panel.

But people close to the process say the velocity of the soundbite culture on Capitol Hill has forced the real action to go behind the scenes, where controversial ideas can be floated, discussed, and digested without becoming the target practice for pundits on cable news and, in turn, outside groups looking out for their interests.

“The only way we’re going to do this is if they can’t be on TV all day long,” a senior Democratic staffer said.

But Gabriela Schneider of the Sunlight Foundation says the secrecy surrounding the talks is only cutting the public, not the lobbyists, out of the process.

“While the committee says they’re trying to keep things intact so that they won’t be persuaded one way or another by outside groups, that’s just not true,” she says. “That’s just not how Washington operates.”