Democrats, Republicans far apart on deficit deal

[November 16, 2011]  WASHINGTON (AP) -- The top Republican on a special deficit-cutting panel says GOP negotiators have "gone as far as we feel we can go" on tax hikes, a public signal that a debt bargain could be out of reach despite weeks of negotiations.

Texas Rep. Jeb Hensarling told CNBC Tuesday that the bipartisan debt supercommittee is "somewhat stymied for the moment" because panel Democrats are insisting on tax increases of up to $1 trillion in exchange for cost curbs on rapidly spiraling benefit programs such as Medicare and Social Security.

The top Democrat on the deficit supercommittee, Sen. Patty Murray of Washington, countered that it's up to Republicans to send a "credible offer with real revenue" to jump-start talks that seem to have mostly stalled since a swap of offers last week.

The deficit for the just-completed budget year was $1.3 trillion, requiring the government to borrow 36 cents for every dollar it spends. Even a successful negotiation that produces $1.2 trillion in cuts will still leave a deficit crisis that requires painful choices by policymakers on taxes and benefits programs, budget experts agree.

The backbiting has intensified since the exchange of offers. The Democrats' most recent plan called for $2.3 trillion in deficit cuts, including a $1 trillion tax increase over the coming decade. Republicans countered with almost $300 billion in new tax revenues as part of a $1.5 trillion debt plan, an offer that even a top Democrat, Majority Whip Dick Durbin of Illinois, called a breakthrough.

"The Democrats won't put a plan on the table to solve the problem, and anything they do that even remotely addresses health care, even superficially, they're insisting on" a $1 trillion tax increase, Hensarling said. "It's not going to happen."

The debt panel is charged with coming up with at least $1.2 trillion in deficit cuts over the coming decade as part of a bargain between President Barack Obama and House Speaker John Boehner, R-Ohio, this summer. Failure would trigger across-the-board spending cuts that especially alarm defense hawks.

Boehner publicly blessed the GOP offer on taxes Tuesday, bucking opposition by some GOP presidential hopefuls and colleagues wary of violating a longstanding point of party orthodoxy.

The supercommittee has until a week from Wednesday to vote on any compromise, but several officials said that in reality, perhaps as little as 48 or 72 hours are available to the six Republicans and six Democrats.

While Boehner's voice is important, his endorsement does not mean all Republicans will follow him or a deal is in sight. Republicans have been unified for two decades in opposition to higher taxes, while Democrats on the supercommittee insist on additional revenue before they will agree to cuts in benefit programs as part of a compromise.

Boehner said the plan, outlined a week ago to Democrats on the committee, was "a fair offer." Adding an overhaul of the federal tax code would generate economic growth, he said.

The full committee hasn't met in several days, but various subgroups have been in near constant contact.

More than deficit reduction is at stake, one year into an era of divided government.

Democrats are hoping to add elements of President Barack Obama's jobs legislation to any deficit-cutting deal, including extensions of a Social Security payroll tax cut and unemployment benefits that are due to expire at the end of the year. But their proposal to use savings from shrinking war spending is opposed by some Republicans.

A comprehensive rewrite of farm programs may hang in the balance, too, and lawmakers also must pass legislation to ensure sufficient funds to reimburse doctors who treat Medicare patients.

The twin issues of taxes and benefit programs have long been stumbling blocks in budget negotiations.

In negotiations last summer, according to numerous officials, Obama and Boehner were considering sizable cuts to benefit programs as well as tax reform that would have raised as much as $800 billion in additional revenue. The talks ultimately failed.

Republican leaders still support the concept of swapping modest tax increases for a tax overhaul. And they say that's a good deal, especially since the Bush-era tax cuts expire at the end of next year.

"It's important for us to, in my opinion, reform the tax code," Boehner said. "And we've got the highest business tax rate in the world. We've got a personal tax system that's so complicated it costs Americans about $500 billion a year to comply with the current tax code," he said.

Republican officials say the GOP offer envisions an overhaul that would drop the top tax rate on personal income to 28 percent from the current 35 percent and shave or eliminate some itemized deductions that are commonly used. The top corporate rate would fall also.

Despite Boehner's comments, GOP presidential contenders Newt Gingrich and Rick Perry said they were prepared to oppose a plan along the lines of the one under consideration. Another candidate, Mitt Romney, brushed aside a question on the subject.

[Associated Press; By ANDREW TAYLOR]

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