In debt talks’ new phase, blame game overshadows fiscal blueprint

Negotiations over the national debt entered a troubling new phase Wednesday on Capitol Hill as lawmakers appeared to spend more time trading blame for the impasse than in talks aimed at developing a blueprint to reduce borrowing.

With a Thanksgiving deadline getting closer, Democrats on the bipartisan “supercommittee” revealed details of a plan they offered to Republicans late last week that would have cut spending by nearly $900 billion over the next decade in exchange for just $400 billion in new taxes.

The proposal represents an apparent shift from earlier Democratic debt-reduction proposals, which demanded as much as $1.3 trillion in new taxes through 2021. It also appeared to mark a big step toward the latest Republican position, which called for about $300 billion in new taxes.

But Republicans said the offer was a ruse that included at least $800 billion in new taxes from the expiration of the George W. Bush-era tax cuts in January.

“It would lock in the largest tax hike in history — at least $800 billion — and then add an additional $400 billion in job-killing tax hikes without pro-growth tax reform,” said Michael Steel, a spokesman for House Speaker John A. Boehner (R-Ohio). In that regard, Steel said, the offer was “a step backward” that Republicans summarily rejected.

Democrats said the proposal did not address the Bush tax cuts.

Democrats and Republicans on the supercommittee said talks were nonetheless continuing in an effort to identify at least $1.2 trillion in savings before next Wednesday’s deadline. But it was unclear which of the panel’s 12 members were engaged in those talks and whether they had any chance of succcess.

“We are still working very hard to get to a fair and balanced deal. It’s what the country expects,” said Sen. Patty Murray (Wash.), the supercommittee’s Democratic co-chairman. “It’s the challenge that we have. We believe we can get there.”

Members of the panel and their aides talked late into the night Tuesday and reassembled in separate partisan huddles Wednesday morning. But no meetings were scheduled with members of both parties present, and all sides acknowledged that no deal was at hand.

“Nothing really to relay right now,” Rep. David Camp (R-Mich.) said at lunchtime Wednesday as he exited a meeting of GOP supercommittee members.

“We had an offer, they had an offer and there have been ongoing negotiations to bridge the differences,” Rep. Chris Van Hollen (D-Md.) said after a two-hour meeting of Democrats on the panel.

Unless the panel acts by midnight Nov. 23, it risks triggering deep, automatic, across-the-board cuts to agency budgets in January 2013. But the effective deadline is approaching even more rapidly: The law that created the supercommittee requires it to have a plan and a cost estimate from congressional budget analysts by midnight Monday, making this week critical.

Boehner and Senate Majority Leader Harry M. Reid (D-Nev.) briefly entered the fray on Tuesday, meeting in Boehner’s office to discuss the supercommittee outlook. But there was no further contact Wednesday.

By mid-afternoon, the six Republicans resumed their huddle in the offices of Rep. Jeb Hensarling (Tex.), the No. 4 House GOP leader who serves as Republican co-chairman of the deficit panel. In a scrum with reporters, Hensarling backed away from remarks he made on CNBC late Tuesday that seemed to slam the door on further negotiations, saying that “we have gone as far as we feel we can go” on the critical issue of taxes.

“I’m willing to look at any offer,” Hensarling said Wednesday. “I’ve been awaiting since mid-August for an offer that actually reforms our entitlement spending and solves the problem. I’m still looking forward to that, and should that come, I would be more than happy to negotiate around that offer.”

But Democrats seized upon the CNBC interview to suggest that Republicans were abandoning the talks.

“I hope they’re not walking away. We’re sure not,” said Sen. Max Baucus (D-Mont.), a supercommittee member.

“I hope that they have not walked away,” Murray added. “We are working very hard to find a place that we can move forward on, and we’re going to continue to do that.”

As the day wore on, however, it was not evident that anything was happening to walk away from. By early evening, Democratic aides were leaking word of their Friday offer, which Murray made to Hensarling in a private conversation.

The Democratic proposal was designed to match a $1.5 trillion debt-reduction package assembled early last week by Sen. Patrick J. Toomey (R-Pa.). That plan called for $400 billion in higher taxes to be generated through a rewrite of the tax code that would aid the economy and improve tax compliance.

Democrats countered with $400 billion in new taxes to be raised by eliminating deductions and closing corporate loopholes immediately. A tax overhaul would not be part of the equation. And they would not agree to permanently extend the Bush tax cuts.

On the spending side, Democrats proposed to match Republicans’ total for reductions, although they ruled out cuts to Social Security and any increase in the Medicare eligibility age. They agreed with a GOP proposal to count $700 billion in savings from the drawdown of troops in Iraq and Afghanistan. But Democrats wanted to reserve $300 billion for new jobs provisions, while Republicans wanted all of the money to pay for the expiration of legal patches that protect Medicare doctors and taxpayers who would otherwise face the alternative minimum tax.

“Democrats put forward a serious counteroffer . . . that meets Republicans dollar-for-dollar on spending and revenue, but demands fairness for the middle class and a plan to create jobs,” said a Democrat close to the talks who spoke on the condition of anonymity to discuss private negotiations. “There was a hope that it would close the gap.”

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
Paul Kane covers Congress and politics for the Washington Post.
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