Crunch time looms as Biden-led budget talks resume

[June 21, 2011]  WASHINGTON (AP) -- It's getting down to crunch time for Vice President Joe Biden and a bipartisan band of lawmakers trying to craft a deal to slash the federal budget and raise the debt limit.

There's a growing sense of urgency for the group to pick up the pace and start making the politically difficult trade-offs required to generate deficit savings in the trillions of dollars rather than in billions. The game plan is for the Biden-led group to reach a tentative pact by Congress' July 4 recess.

Negotiators have snapped up easy-to-pluck savings, but agreement is lacking on the types of controversial big-ticket items that would produce major deficit cuts of the size sought by negotiators. The hope is to produce more than $2 trillion in deficit cuts over the coming decade or so, to be paired with a commensurate increase in the government's ability to borrow to avoid a first-ever default on U.S. obligations.

So far, however, neither side has put any sacred cows on the chopping block. Republicans insist the final deal won't include anything related to tax increases -- even after a 73-27 Senate vote to kill a special tax break for the ethanol industry. They're also reluctant to curb the Pentagon budget.

Democrats, meanwhile, are reluctant to offer up deeper cuts to domestic programs or even consider modest cuts to health care programs like Medicare and Medicaid unless Republicans show flexibility on revenues, like getting rid of the ethanol tax break of 45 cents per gallon.

"Balance on both sides. That's what it's going to take" to reach an agreement, Senate Finance Committee Chairman Max Baucus, D-Mont., said Monday. Baucus is representing Senate Democrats in the negotiations.

The two sides are closest to agreement on proposals such as cutting student loan subsidies and farm programs and facilitating new auctions of the electromagnetic spectrum by allowing broadcasters to reap some of the profit from the sale. It's commonly assumed federal workers will contribute more to their pensions and that corporations will pay more to have the government guarantee their pension plans. The government is likely to sell excess property.

And both President Barack Obama and House Republicans point to more than $1 trillion in savings by claiming that the costs of military operations in Iraq and Afghanistan will quickly shrink to $50 billion a year instead of the almost $160 billion provided for 2011. The $1 trillion figure may be exaggerated, but hundreds of billions of dollars may be possible.

Even so, such savings add up to just a fraction of what it would take to meet the twin goals of having the deficit cuts at least match the amount of increase in the borrowing cap required to keep the government afloat past next year's elections. Congressional leaders and the administration don't want a politically painful repeat vote on the debt limit before then.

A building block to any measure is capping the amount of money Congress can allocate each year for the day-to-day operations of federal agencies. Obama essentially wants a freeze at current levels, saving perhaps $1 trillion from the Pentagon and domestic agencies. Republicans want to cut domestic agencies, on average, back to 2008 levels and are more protective of the military.

Highlights of the proposals under discussion:

• Saving at least $18 billion over 10 years by eliminating student loan subsidies to those enrolled in graduate schools. Republicans are pressing for another $47 billion by eliminating the in-school subsidies for undergraduates.

• Requiring federal workers to contribute more to their pensions. Democrats are wary and won't allow the $120 billion-plus sought by Republicans over the coming decade, but appear to be likely to accede to some of the savings.

• Reaping up to $28 billion over 10 years through auctioning electromagnetic spectrum.

• Raising $10 billion or so from sale of unused federal property.

• Cutting costs of providing prescription drugs under Medicare. The White House says it can reap $200 billion by requiring additional rebates from drug companies and allowing the government to negotiate with drug companies within Medicare. But the drug industry has strong support from lawmakers in both parties, and powerful Democrats haven't forgotten its support for Obama's massive health care overhaul.

• Cutting Medicare payments for durable medical equipment like home hospital beds and oxygen tanks.

[Associated Press; By ANDREW TAYLOR]

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