Supercommittee’s lack of progress on debt reduction raises alarms on Hill

With a Thanksgiving deadline fast approaching, a powerful congressional panel devoted to debt reduction is running in rhetorical circles, unable to break the impasse over taxes that has long blocked aggressive action to tame the national debt.

Though the committee’s 12 members have been meeting for nearly two months in closed-door sessions, lawmakers, aides and others involved in the process say they have yet to reach consensus on the most basic elements of a plan to restrain government borrowing.

There is no agreement on the scope of their ambitions: Should they aim to meet a savings target of at least $1.2 trillion over the next decade or “go big” with savings of $4 trillion or more? Nor is there agreement on a benchmark against which to measure those savings. And while individual ideas for savings abound, the committee has yet to assemble a comprehensive framework that would demonstrate its ability to produce a plan of any size before the Nov. 23 deadline.

Committee members say there is still time to cut a deal and have congressional budget analysts assess it. But the lack of progress is raising alarms on Capitol Hill and beyond as lawmakers and other observers grow increasingly worried that the panel is running out of time.

“The clock is ticking,” Rep. Chris Van Hollen (D-Md.), a committee member, said Wednesday. “The next three weeks will be make-or-break for the success of this committee.”

The panel — officially called the Joint Select Committee on Deficit Reduction and unofficially dubbed the “supercommittee” — was created this summer in the wake of an epic battle to raise the legal limit on government borrowing. House Republicans refused to lift the ceiling without a plan to restrain the debt. But they also refused to raise taxes, rejecting a deal with President Obama that would have made significant cuts to federal health and retirement programs in exchange for around $1 trillion in new revenue over the next decade.

In the end, Democrats agreed to accept caps on agency budgets to reduce spending by more than $900 billion by 2021 and to create the supercommittee, which was tasked with identifying additional savings. If the committee, comprising six lawmakers from each party, fails to reach an agreement that wins congressional approval by Christmas, $1.2 trillion in additional across-the-board cuts will be triggered in January 2013.

Democrats have argued that the trigger would force Republicans to the bargaining table over taxes because the automatic reductions would fall heavily on the Pentagon. But so far, that tactic has not worked. House Speaker John A. Boehner (Ohio) and other GOP leaders have yet to show any appetite for significant tax hikes in advance of the 2012 election, when they hope to campaign against Democrats on the issue.

Supercommittee members have discussed a two-stage process that would first cut entitlement spending and close several tax loopholes, such as a write-off for corporate jets. Then, the tax-writing committees in the House and Senate would be instructed to overhaul the tax code to lower rates and raise sufficient additional revenue to meet the committee’s overall target.

But that approach has been stymied by Republicans’ refusal to contemplate higher tax revenue except through stronger economic growth, according to people in both parties who spoke on the condition of anonymity to discuss the private talks.

Without a commitment to additional revenue, Democrats have refused to commit to specific entitlement cuts, these people said, leaving even the most eager dealmakers frustrated and pointing fingers at the other side.

“If it was easy, it would have been done by now. No decisions have been made,” said Sen. Rob Portman (R-Ohio), a former George W. Bush White House budget director and one of the committee’s strongest proponents of a far-reaching deal.

On Wednesday, the supercommittee took testimony from a bipartisan group of senators known as the Gang of Six who forged agreement this year on a plan that included as much as $1.2 trillion in new revenue. But some Republicans in the group have since argued that tax collections would rise solely through economic growth.

After their testimony, there was no sign of a breakthrough.

“The thing that turns the ignition on the car is an upfront agreement that the deal will include significant new revenues and significant new entitlement savings,” said a longtime lobbyist tracking the talks. “The car doesn’t get out of the garage until everyone has joined hands on that fundamental framework. And so far, there’s no movement on that fundamental framework.”

While anxiety about the defense trigger has yet to force movement on taxes, it is increasing pressure for a deal. So far, defense hawks have focused on finding a way around the trigger, with some senior Republicans privately urging the supercommittee to count savings from the drawdown in Iraq and Afghanistan, worth as much as $1.1 trillion over the next decade.

Boehner last week dismissed that approach, saying the reductions are “already going to happen.” House Majority Leader Eric Cantor (R-Va.) has criticized war savings as “gimmicks and accounting tricks.” But some GOP lawmakers privately view them as the best hope for avoiding automatic cuts to defense. Others, such as Sen. John McCain (R-Ariz.), have vowed to defuse the trigger through legislation if the supercommittee fails to act.

Such talk worries some lawmakers and outside budget analysts. If the supercommittee cuts a bad deal that replaces the trigger with budget gimmicks, they said, it would present a far greater threat to public confidence and the economy than if the panel simply failed to act.

Steven Hess, who analyzes sovereign debt for Moody’s, said the credit ratings agency decided to uphold the nation’s AAA rating in August in part because “more than $2 trillion in deficit reduction was at least planned.”

Tinkering with that agreement “would bring added pressure from the financial markets,” said Ken Bentsen, an official with the Securities Industry and Financial Markets Association. Markets, Bentsen said, would begin to fear “that Washington was just abandoning everything.”

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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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