Developments:
Nov. 3 Mitch McConnell, the Senate Republican leader, said that he saw no possibility of extending the deadline for a powerful joint committee of Congress to recommend ways of reducing the federal budget deficit. He spoke a day after a leading Democrat suggested that the committee could ask for more time if the current stalemate persists.
Background
The Joint Select Committee on Deficit Reduction is a bipartisan, 12-member panel created by the deal struck by President Obama and Congressional leaders in late July 2011 to allow the government to raise the federal debt ceiling.
The agreement called for at least $2 trillion in deficit reduction over 10 years to offset the $2.4 trillion increase in the amount the Treasury Department is authorized to borrow. The reductions were to come in two steps, with $900 billion being decided upon immediately, based on spending cuts negotiated between Republicans and Democrats in the months of talks that led up to the pact.
The second round of reductions is the business of the Joint Select Committee, which some in Washington have taken to calling the “supercommittee.”
The stated goal of the panel — evenly split between Democrats and Republicans, the House and Senate — is to reduce federal budget deficits by a total of at least $1.2 trillion over 10 years. It was given a deadline of Nov. 23, 2011. Any recommendations it makes are to be voted on immediately by both chambers of Congress, with no filibusters or amendments allowed.
If the committee cannot agree on a plan, or if Congress does not enact its recommendations by Dec. 23, the result would be $1.2 trillion in automatic spending cuts — called “trigger’' cuts — in January 2013, half of which would come from Pentagon programs. Medicaid and Medicare benefits would be exempt, although provider payments could be reduced.
The committee got underway in September under a cloud of pessimism. In late October, with less than a month till its deadline, a majority of Democrats on the panel offered up a plan that built on President Obama’s “grand bargain’' proposal that had been rejected by Republicans during the debt ceiling talks. It would cut a total of $2.5 trillion to $3 trillion, through cuts in the growth of federal entitlement programs, including Medicare, and more than $1 trillion in new tax revenues.
The proposal, which came after weeks of silence, has virtually no chance of winning approval from Republicans on the committee, who have repeatedly said they would not accept a package that included tax increases.
Democrats had concluded earlier in the fall that they might have — for the first time in many months — some sorts of advantages in the bargaining ahead.
Under the terms of the deal that created the committee, Republicans cannot threaten a default again to get their way, because the deal increased the debt limit enough to cover borrowing through 2012. Also, the automatic cuts in 2013 would hit military programs hard — an outcome Republicans are more eager than Democrats to avoid. And a stalemate could also lead to the expiration of the Bush tax cuts; Mr. Obama has vowed to sign an extension only for households with taxable income under $250,000.
Mr. Obama’s preference remains the “grand bargain” that eluded him with Mr. Boehner — with short-term stimulus measures and long-term deficit reduction greater than mandated for the committee, including higher revenues and savings from entitlement programs.
The slim hopes for a grand bargain rest on the parties’ mutual interest in overhauling the tax code to rein in tax breaks and using the new revenues to lower taxpayers’ rates. But Democrats and many budget groups say some of the new revenues should go to reduce deficits, while many Republicans insist that all must go to cutting tax rates.
Obama’s Deficit Plan
In September, President Obama outlined a plan for reducing the deficit by more than $3 trillion over 10 years.
His proposal called for $1.5 trillion in tax increases, primarily on the wealthy, through a combination of letting the Bush-era tax cuts expire for the most affluent taxpayers, closing loopholes and limiting the amount that high earners can deduct. The proposal also includes $580 billion in adjustments to health and entitlement programs, including $248 billion to Medicare and $72 billion to Medicaid. Administration officials said that the Medicare cuts would not come from an increase in the Medicare eligibility age. Tthe plan also counts a savings of $1.1 trillion from the ending of the American combat mission in Iraq and the withdrawal of American troops from Afghanistan.
At the committee’s first meeting on Sept. 8, several Republicans said that entitlements like Social Security, Medicare and Medicaid were the main cause of annual deficits and should be the panel’s focus. Democrats have long resisted cuts to those programs, but during the debt ceiling talks President Obama said he was willing to make changes in them in return for increases in tax revenue.
And members of both parties were feeling pressure to address the long-term costs of programs like Medicare before the baby boom generation moves into retirement and starts consuming more benefits.
Going Beyond the Mandate
By mid-September, more pressure was building on the committee to “go big” — beyond its mandate to shave as much as $1.5 trillion from budget shortfalls over 10 years — even as doubts remained about the panel’s ability to find enough bipartisan agreement to meet even the original goal.
A group of at least 57 prominent business executives and former government officials signed a petition in support of a greater deficit reduction. Among them were former treasury secretaries, budget directors and economic advisers to eight presidents from Richard M. Nixon to Mr. Obama; former Congressional leaders; and executives of top companies. The letter reflects a broad sense of urgency in both parties, and among economists and businesses, that the nation must put in place long-range measures to shrink future deficits. At current spending levels, those deficits are expected to balloon over the next decade as the population ages and as health care costs rise.
The letter did not call for short-term job-creation measures like the tax cuts and infrastructure spending Mr. Obama proposed on Sept. 8, which would add to deficits initially. Even so, many of the signers, liberals and conservatives, called for such steps.
Who’s Who on the Panel
The committee’s members were appointed by the Senate majority and minority leaders, the speaker of the House and the House minority leader.
Senate majority leader Harry Reid named Senator Patty Murray, Democrat of Washington, co-chairwoman of the new committee and appointed two other Democratic senators, Max Baucus of Montana and John Kerry of Massachusetts, to the panel. Ms. Murray is chairwoman of the Senate Democrats’ campaign arm, the Democratic Senatorial Campaign Committee.
Speaker John A. Boehner chose three senior Republican House memebrs: Jeb Hensarling of Texas, and Dave Camp and Fred Upton, both from Michigan. Mr. Hensarling, who is chairman of the House Republican Conference, will be co-chairman of the new panel. The Senate Republican leader, Mitch McConnell of Kentucky, chose Senators Jon Kyl of Arizona, Rob Portman of Ohio and Patrick J. Toomey of Pennsylvania.
Representative Nancy Pelosi of California, the House minority leader, named three members of her caucus’s leadership: Representative James E. Clyburn of South Carolina, the No. 3 House Democrat; Representative Xavier Becerra of California, vice chairman of the Democratic Caucus; and Representative Chris Van Hollen of Maryland, the senior Democrat on the House Budget Committee.
The deal that created the committee was criticized by some liberals in Congress as a “heads they win, tails we lose’' proposition, guaranteeing that a Republican refusal to consider tax increases would result in the spending cuts that Republicans consider the best approach to deficit reduction.
It was criticized by some conservatives — and by all but one of the 2012 Republican presidential candidates — for allowing the possibility of tax increases, and for not cutting into entitlements. Social Security, Medicaid and Medicare benefits were all exempted from the automatic cuts.
Some members of both parties complained that the panel would usurp their authority to write legislation.
Within days of the deal being struck, both sides began to maneuver for advantage. A fight broke out specifically over whether the amount of deficit reduction should be calculated by comparison to current law, under which all of the Bush tax cuts would expire in 2012, or in comparison to proposals to extend most of the tax cuts, as Democrats want, or all of them, as Republicans propose. If current law is used, more cuts elsewhere would be needed to offset the loss of the revenues that would follow the expiration of the tax cuts.
Commissions in the Past
The options on the table have been studied by numerous expert panels, including several in the past year. The problem is not so much determining how to align the government’s revenues and spending; it is in reaching a compromise on the specific elements of a plan and then finding the political will to enact the necessary spending cuts, tax increases or both.
In the last six decades, Washington has turned to more than a dozen blue-ribbon panels to grapple with fiscal problems. These include the 1947-49 Hoover Commission, the 1982-84 Grace Commission and most recently, the Simpson-Bowles Commission, a bipartisan panel President Obama created by executive order in 2010 that included 12 sitting members of Congress.
The panels were often devised as a way to give political cover to policy makers so they could make unpopular changes to things like entitlements and tax rates. In most cases, though, Congress ignored the proposals or deferred action.
Even the panel usually held up as the exception that proved the rule, the 1981-83 Greenspan Commission set up to revamp Social Security, was largely a failure.
According to an unpublished memoir written by one of the now-deceased members of the commission, the panel deadlocked and then splintered. President Reagan and the House leadership were able to eke out a deal to save Social Security only by engaging in separate negotiations just as the entitlement program was about to go bankrupt.
