Larger debt debate looms on the Hill

By Chris Butler, AP

Grover Norquist of Americans for Tax Reform says Republicans will be held to pledges against raising taxes.

EnlargeCloseBy Chris Butler, AP

Grover Norquist of Americans for Tax Reform says Republicans will be held to pledges against raising taxes.

Even as the White House and congressional leaders work to finalize their latest deal, a bipartisan group of senators is seeking to cut $4 trillion from federal deficits over the next decade — 120 times more than the amount being sought to avert a shutdown.

Their efforts represent the most serious assault on federal deficits since a 1997 deal between President Clinton and a Republican Congress led to four years of surpluses. Since then, a decade of tax cuts, wars and recessions have sent the nation deeper and deeper into debt.

DEBT: Who's who in the fight to reduce the deficit Beginning this week in the House, Congress will attempt to reverse that trend. The effort faces opposition from conservative groups opposed to higher taxes and liberal groups seeking to protect Social Security, Medicare and Medicaid. But a coalition of business leaders, budget experts and former government officials is pushing for bold action on the national debt this year.

Three debates on deck Late last month, 64 senators signed a letter to President Obama urging that he support deficit-reduction talks. Last week, budget watchdogs tried to get the same number of former government officials and experts to sign a similar letter. They exceeded expectations when the number quickly grew to 69.

"Not only is momentum building, it's really starting to feel unstoppable," says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which led the latest letter-writing effort. "I don't think we have until after the election to wait."

As the White House and lawmakers search for cuts from within one-eighth of the 2011 budget devoted to annually funded domestic programs, three broader debates loom over the budget, which includes entitlement programs, defense spending and soaring interest costs:

•The 2012 budget. House Budget Committee Chairman Paul Ryan, R-Wis., plans to release a Republican budget plan for 2012 on Tuesday that will attempt to rein in government entitlement programs. Ryan's "Roadmap for America's Future" features dramatic changes that could boost Medicare costs and reduce Social Security benefits for Americans now under 55.

•The federal debt limit. The government's $14.3 trillion debt limit will be reached this month or in May, forcing Congress to raise it or risk the country defaulting on its obligations. Defaulting would be unprecedented, but many Republicans such as freshman Sen. Marco Rubio of Florida say they won't support more debt without a commitment to major cuts in spending.

•A long-term debt-reduction plan. The best chance for bipartisan action on the debt could come later this year if a group of six senators working in private produces a plan to cut $4 trillion over the next decade that both Democrats and Republicans can support. Led by Sens. Mark Warner, D-Va., and Saxby Chambliss, R-Ga., the group is trying to turn the December call for spending cuts and tax increases from Obama's commission into legislation.

Fueling the bipartisan talks: fear of the economic crisis that would result if the soaring U.S. debt caused international investors to sour on Treasury bonds. On Tuesday, dozens of senators will hear from Kenneth Rogoff and Carmen Reinhart, whose recent paper for the National Bureau of Economic Research warns of future crises.

"This time really is different," Warner says. "There is a sense in the country that we are on as thin ice as any time in my lifetime."

Still, moving consensus from a group of six senators to majorities in the Senate and House appears unlikely, particularly with the 2012 elections approaching and groups on the right and left working against compromise.

On the right, anti-tax advocates such as Grover Norquist, president of Americans for Tax Reform, say they'll hold Republicans such as Chambliss to previous pledges against raising taxes.

"Right now, these people are having impure thoughts about tax increases. They haven't actually voted for one," Norquist says.

Tea Party activists want to prevent Republicans from compromising on a deficit-reduction package including higher taxes.

"Somebody here has to be the conscience of the conservatives," says Dick Armey, a former House GOP leader who now heads the anti-tax group FreedomWorks.

On the left, groups representing seniors and the poor are fighting reductions in Social Security, Medicare and Medicaid.

"One thing you can say about seniors is they vote," warns Edward Coyle, head of the Alliance for Retired Americans.

Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities, says billions of dollars in Medicaid cuts in Ryan's plan would "start to ration health care by income."

Cuts and increases redefined To get around the opposition, those favoring major deficit reduction are trying to change the terms of the debate. Chambliss says "tax increases, pure and simple" won't pass the Senate — but he views eliminating special-interest tax breaks as "a spending issue. It's a tax expenditure."

Former Republican senator Alan Simpson of Wyoming, who co-chaired Obama's fiscal panel, says: "You don't use the word 'cut' in Social Security. You use the words 'restoring solvency.' "

The wildcard in the deficit talks is the White House. Obama has vowed to act upon some commission recommendations, including corporate tax changes But his proposed 2012 budget had few specific proposals.

Many experts say major action on the deficits and debt may have to await a market-induced crisis.

"The markets, in my view, will force our hand," says Steve Bell, senior director of economic policy at the Bipartisan Policy Center and a veteran of congressional budgets. "We only respond to crises that are palpable."

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