By Lori Montgomery
Washington Post Staff Writer
Thursday, February 17, 2011; 8:54 PM
With President Obama calling for bipartisan talks to tackle the nation's budget problems, a group of influential senators from both parties is developing a framework that calls for higher taxes and limits on all categories of government spending.
The plan is still in the works, but people with knowledge of the talks said the senators hope to present it soon after the week-long Presidents' Day recess so they can begin assessing its political support.
The group, known informally as the "Gang of Six," began meeting last year soon after Obama's fiscal commission recommended an ambitious plan to reduce the deficit. Four senators supported the commission report - Budget Chairman Kent Conrad (D-N.D.), Majority Whip Richard J. Durbin (D-Ill.), Tom Coburn (R-Okla.) and Mike Crapo (R-Idaho). They joined forces with Sens. Mark R. Warner (D-Va.) and Saxby Chambliss (R-Ga.), who had been working to build support among moderates for a bold plan to control the national debt.
The group hopes to advance the commission's recommendations, which would reduce deficits by $4 trillion over the next decade. Doing so would require lawmakers to embrace some politically perilous policies, however, including raising the retirement age to 69, charging wealthy seniors more for Medicare and ending some cherished but expensive tax breaks.
Taking the commission's report as its template, the group is drafting legislation that would direct congressional committees to find a way to put it into effect. On taxes, for example, the legislation would have tax-writing panels in the House and Senate develop a tax overhaul that would raise hundreds of billions of dollars in additional revenue and lower the top tax rate, which stands at 35 percent.
The legislation would set a 2013 deadline for action. If Congress did not approve a tax overhaul that met annual targets for new revenue by that time, a new tax system would automatically take effect, raising taxes across the board by reducing the value of various tax breaks, such as the deduction for home mortgage interest and the tax-free treatment of employer-paid health care.
Still to be resolved is whether the measure would explicitly set the new top tax rate at 29 percent, as the commission proposed. Republicans are arguing for the mandate, and for a provision that would automatically lower the top tax rate to 29 percent if Congress does not act.
On Social Security, the group is considering new standards that the committee would implement. Failure to act would force a vote in Congress on the commission's plan to raise the retirement age and reduce payments to wealthier retirees. However, the goals for changes to Social Security are less clear, and senior Senate Democrats said they expect the group to avoid the most unpalatable of the commission's recommendations.
In addition, the group would set explicit annual limits on discretionary and mandatory spending, forcing lawmakers to make hard choices about where to spend scarce tax money. If Congress did not meet the limits, they would be enforced by sequestration, a which requires the White House budget office to cut across the board until the targets are met.
The group has yet to decide whether its plan will be offered as a companion to legislation to raise the legal limit on government borrowing, a must-pass measure that will face significant political opposition unless it is coupled with a strategy to restrain borrowing.