Deficit 'Super Committee' Hits Rough Patch

Associated Press

Even as a recent good-faith swap of offers showed a narrowing of differences over taxes, a special deficit-cutting "super committee" seems to have hit a major snag just two weeks before its deadline.

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The two sides can't even agree on who should make the next move after an exchange of plans Monday night in which Democrats scaled back their demands on taxes even as Republicans for the first time offered higher tax revenuesas part of a plan to cut deficits by $1.5 trillion over the coming decade.

Democrats' most recent plan calls for $2.3 trillion in deficit cuts, including $1 trillion in new revenue skimmed off the top as Congress overhauls the tax code. Republicans countered with an offer — pilloried by Democrats as a giveaway to the wealthy — for almost $300 billion in tax boosts over the same timeframe.

The top Republican on the panel says the members are continuing to plug along.

"I have not given up hope and I hope my Democrat colleagues have not given up hope," the panel's co-chairman, Jeb Hensarling (R.-Texas), told reporters. "The stakes are too high for the economy to hold up my hands and give up. We're not."

The glass-half-full interpretation of the GOP proposal was that it was a significant advance because even Tea Party favorites like Sen. Pat Toomey(R.-Pa.), the chief author of the plan, endorsed higher tax revenues.

The No. 2 Senate Democratic leader, Richard Durbin of Illinois, said he considered this week's GOP offer "an honest effort" and "a breakthrough that can lead to an agreement. That's what we need."

But Democrats on the super committee, as well as staff operatives working behind the scenes, mounted a spirited attack on the GOP plan, which was largely depicted in the media as a big shift for Republicans.

Democrats said the latest GOP idea is unfairly skewed in favor of the wealthy because it would require new limits on tax breaks that mostly benefit middle-income taxpayers, such as the child tax credit, personal exemption and deduction for home mortgage interest, while lowering the top rate for top earners from 35 percent to 28 percent.

The Toomey plan would lower other tax brackets proportionately, reducing the 28 percent bracket to 23 percent and the 25 percent bracket to 20 percent.

An analysis by Democratic tax experts says that to lower rates so dramatically would "require eliminating virtually all deductions for the middle class."

The document angered some Republicans, especially after they traced it back to staff aides to Finance Committee Chairman Max Baucus (D.-Mont.), who they had previously viewed as one of the panel members they were working most cooperatively with.

Republicans said the Democratic paper didn't accurately reflect Toomey's proposal, which would claim $250 billion in higher tax revenues by cracking down on deductions claimed by people in the upper two tax brackets.

The most recent Democratic offer scaled back an earlier Democratic demand for $1.3 trillion in higher taxes, a concession to Republicans. At the same time it jettisoned a plan to slow the growth in future cost-of-living increases in Social Security benefits, a provision that liberal Democrats oppose.

The one-page proposal was handed to Republicans at a meeting Monday night attended by some but not all members of the super committee. At the same session, GOP lawmakers in attendance advanced a revised proposal of their own that signaled for the first time they would be willing to accept higher revenues as part of a plan to cut deficits over the next decade.

Given the unusual secrecy of the meeting and the committee's Nov. 23 deadline to produce at least $1.2 trillion in savings, it appeared that the pace of activity on the panel was accelerating. Less clear was whether there was still time to bridge enormous differences on priorities, or whether each side was laying the groundwork for trying to blame the other in case gridlock triumphs.

The super committee, comprised of six Republicans and six Democrats, has been working for weeks. Evidence of progress has been scarce, with Republicans demanding large cuts in benefit programs such as Social Security and Medicare, while Democrats pressed for additional tax revenue as a condition for agreeing to make deep spending cuts.

As hard feelings intensified among panel members, other lawmakers said both sides had shown flexibility on the issues that long have been at the root of Congress' inability to compromise on sweeping plans to cut deficits.

"Republicans have put revenues on the table. Democrats have put entitlements on the table," said Sen. Lamar Alexander (R.-Tenn.). "They both need to put more of each on the table."

A spokesman for House Speaker John Boehner (R.-Ohio), dismissed what Democrats had presented earlier in the week. "Right now, we are waiting for a response to what the second-ranking Democratic leader in the Senate called 'a breakthrough' — and we've seen nothing," said Michael Steel.

The revised Democratic plan totaled $2.3 trillion in savings over the next decade, including projected savings in interest costs the government would realize from lower deficits, higher than the GOP $1.5 trillion blueprint.

Democrats' proposed spending on Medicare would be restrained by $350 billion over a decade, and on Medicaid , by $50 billion.

Another $200 billion would come from defense, and an identical amount from a broad swath of government programs ranging from the parks to transportation.

Democrats also called for an overhaul of the tax code that would result in an individual rate of no higher than 35 percent and a scaling back of itemized deductions.

Broadly speaking, however, the GOP plan would raise new revenues of at least $500 billion, both skimmed off the top as Congress completes an overhaul of the tax code and from proposals such as auctioning broadcast spectrum, raising Medicare premiums and increasing aviation security fees.

The plan also would cut spending by about $700 billion, mixing a less generous cost-of-living adjustment for Social Security beneficiaries with further cuts to agency operating budgets and curbs on the booming growth of Medicare and the Medicaid health care program for the poor and disabled.

Lower interest payments on the national debt would provide the remaining savings.