Mission unaccomplished: Debt panel nears failure

WASHINGTON - It's just about over for a special deficit-reduction supercommittee, which appears set to admit failure on Monday in its quest to sop up at least $1.2 trillion in government red ink over the coming decade.

The bipartisan 12-member panel is sputtering to a close after two months of talks in which key members and top congressional leaders never got close to bridging a fundamental divide over how much to raise taxes. The budget deficit has forced the government to borrow 36 cents of every dollar it spent last year.

In a series of television interviews, not a single panelist seemed optimistic Sunday about any last-minute breakthrough, and aides said any remaining talks had broken off.

Monday is deadline day. The panel officially has until Wednesday to approve a deficit-slashing plan, but under its rules, any plan would have to be unveiled 48 hours in advance.

Lawmakers already taking aim at auto-cuts
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Instead, it appeared co-chairs Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas would issue a statement declaring the panel's work at an end, aides said.

The two sides had never gotten particularly close, at least in the official exchanges of offers that were leaked to the media.

"There is one sticking divide. And that's the issue of what I call shared sacrifice," said panel co-chair Sen. Patty Murray, D-Wash., on CNN's "State of the Union."

"The wealthiest Americans who earn over a million a year have to share too. And that line in the sand, we haven't seen Republicans willing to cross yet," she said.

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Republicans said Democrats' demands on taxes were simply too great and weren't accompanied by large enough proposals to curb the explosive growth of so-called entitlement programs like Medicare and Medicaid.

"If you look at the Democrats' position it was `We have to raise taxes. We have to pass this jobs bill, which is another almost half-trillion dollars. And we're not excited about entitlement reform,'" countered Republican Jon Kyl of Arizona on NBC's "Meet the Press."

"Put a bow on it. It's done," said an aide to a supercommittee Republican.

Failure by the panel would trigger about $1 trillion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget, starting in 2013, according to the Congressional Budget Office. This action, called a "sequester," would also generate $169 billion in savings from lower interest costs on the national debt.

Defense Secretary Leon Panetta says the required cuts of up to $454 billion to the Pentagon would be "devastating" and leave a "hollow force." Defense hawks of Capitol Hill promise they won't allow them to be that deep.

Sens. John McCain, R-Ariz., and Lindsey Graham, R-S.C., say they are writing legislation to prevent what they say would be devastating cuts to the military. House Republicans are exploring a similar move. Democrats maintain they won't let domestic programs be the sole source of savings.

In the face of those efforts, President Barack Obama has told the debt panel's co-chairmen that he "will not accept any measure that attempts to turn off the automatic cut trigger," White House spokesman Jay Carney told reporters last week. The leaders of both parties in the House and Senate have expressed similar sentiments — seemingly making any attempt to restore the money futile.

"Yes, I would feel bound by it," House Speaker John Boehner, R-Ohio, said recently of the automatic cuts. "It was part of the agreement."

But that doesn't mean rank-and-file lawmakers won't try to block the cuts, or that viewpoints might not change if the right deal is offered — especially in the hothouse atmosphere of next year's presidential and congressional campaign or its aftermath.

With nearly $500 billion in defense spending and an equal amount of domestic dollars at stake, plenty of lawmakers are ready to try blocking all or parts of those automatic cuts, if only to win favor from backers of programs whose funds are on the chopping block.

"I have no doubt that there will be efforts to turn it off," said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. "Never underestimate the willingness of politicians to try to avoid making some of the hard choices."

It's unclear how successful such an effort would be. Not only would an Obama veto be tough to overcome, but pressure from the financial markets on politicians to rein in the government's huge budget shortfalls could keep lawmakers from easing the automatic reductions.

The panel's failure also sets up a fight within a battle-weary, dysfunctional Congress over renewing a payroll tax cut and jobless benefits for the long-term unemployed, both of which are set to expire at the end of the year. Both proposals are part of President Barack Obama's $447 billion jobs plan.

Extending the current 2 percentage point payroll tax cut isn't a popular idea with many Republicans, but allowing it to expire could harm the economy, economists say. So too would a cutoff of unemployment benefits averaging about $300 a week to millions of people who have been out of work for more than six months.

Serious negotiations ended Friday after Democrats rejected a $644 billion offer comprised of $543 billion in spending cuts, fees and other non-tax revenue, as well as $3 billion in tax revenue from closing a special tax break for corporate purchases of private jets. It also assumed $98 billion in reduced interest costs.

Earlier exchanges featured a more than $3 trillion plan from Democrats that would have increased tax revenues by $1.3 trillion in exchange for further cuts in agency budgets, a change in the measure used to calculate cost-of-living increases for Social Security beneficiaries, and curbs on the growth of Medicare and Medicaid.

"We put on the table a proposal that required tough compromises on both sides, and they never did that," said Rep. Chris Van Hollen, D-Md., the only House Democrat on the panel to participate in late-stage bipartisan talks.

Republicans countered with a $1.5 trillion plan that included a potential breakthrough — $250 billion in higher taxes gleaned as Congress passes a future tax reform measure. The plan was trashed by Democrats, however, who said it would have lowered tax rates for the wealthy too far while eliminating tax breaks that chiefly benefit the middle class.