Glimmers of hope for U.S. deficit-cutting panel

WASHINGTON Sat Aug 13, 2011 3:47pm IST

U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/Files

U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011.

Credit: Reuters/Lee Jae-Won/Files

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WASHINGTON (Reuters) - Having said no to taxes for months, Republicans now are saying maybe, in the face of public disgust over a deadlock in the U.S. Congress, a near government default and a worsening global economic crisis.

Prompting some hope for a return to fiscal order are the statements and reputations of some of the six Republicans named this week to join with six Democrats on a special committee to end the standoff over the U.S. deficit.

In one of his first interviews after being named to the "Joint Select Committee on Deficit Reduction," Representative Dave Camp told Reuters, "I don't want to rule anything in or out" when the panel starts its work.

That's a far cry from what had been a Republican wall of opposition to any tax increases when President Barack Obama negotiated a $917 billion deficit-reduction downpayment with Republicans that also was aimed at raising U.S. borrowing authority by Aug. 2.

Public disgust with the long, bitter budget and debt limit fight that has consumed Washington all year could have played a role in the less confrontational tone.

A Reuters/Ipsos poll released this week found 49 percent of those polled had a negative view of Republicans in the wake of the debt limit deal, compared to 42 percent for Obama and 40 percent for Democrats broadly.

John Feehery of Quinn Gillespie Communications and a former Republican congressional staffer said lawmakers may now be more willing to reach a deal on additional deficit reductions given the public reaction to the debate over the debt ceiling.

"People are going back home (during the August recess) and they are finding the intense partisanship does not really work in the rest of the country," Feehery said.

Further evidence that the "super committee" is taking its responsibilities seriously: members are considering cutting short their August recess to start work, knowing a Nov. 23 deadline allows little time to tackle major tax and budget questions that could lead to another $1.5 trillion in savings over the next decade.

Representative Chris Van Hollen, a Democratic member of the panel, told Reuters, "There's a good argument in favor of getting an early start." "There have been a number of conversations on both sides of the aisle" about it, he added.

HISTORY OF DEAL-MAKING

Feehery and other analysts feel the composition of the committee also bodes well for agreement.

"These are folks who are deal cutters," Feehery said of Camp, Republican Senator Rob Portman, a former White House budget director, and Representative Fred Upton. Upton worked on some major tax and spending agreements during a stint at the White House budget office under President Ronald Reagan.

Even conservative partisan Representative Jeb Hensarling may be ready to deal, analysts say. "In the right context I do not see him as a guy that would just stick himself in concrete," said Steve Bell, a former Senate Budget Committee aide who is now with the Bipartisan Policy Center.

These Republicans will be sitting across the table from some experienced Democratic deal-makers, notably Senators John Kerry, a former presidential candidate, and Max Baucus, who has deep experience in taxes and healthcare benefits, which will dominate the talks. Meanwhile, House Democrat Xavier Becerra, a liberal stalwart, has urged members to keep an open mind.

Becerra and fellow House Democrat James Clyburn could be instrumental in building support in the liberal wing of their party for any potential deal.

The group's work will be getting underway against the backdrop of global market turmoil, a European debt crisis and rising concerns the U.S. economy could reverse its recovery from the deepest recession since the Great Depression.

And later this month, the Congressional Budget Office is expected to release its latest economic outlook and quantify its impact on Washington's deep budget deficits, which have been hovering around $1.5 trillion annually.

All these factors put pressure on the panel to produce.

Also working in the committee's favor is that $1.5 trillion in savings over 10 years is not insurmountable in the context of a $3.7 trillion annual budget.

Negotiations earlier this year led by Vice President Joe Biden have identified many possible ways to pare deficits.

So, if Republicans were to go along with modest revenue increases, Democrats might find it easier to say yes to equally modest savings to the Medicare healthcare program for the elderly, some of which already have been suggested by Obama.

But even if the super committee settles on around $1.5 trillion in new savings, it likely will not be enough to satisfy global financial markets demanding a more ambitious result -- as much as double that amount -- accomplished through long-term reforms of government benefit programs and a broad revamp of the U.S. tax code.

(Editing by Todd Eastham)

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