U.S. debt reduction panel remains far apart

WASHINGTON Sun Nov 20, 2011 10:01pm IST

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WASHINGTON (Reuters) - Members of a congressional deficit-reduction committee voiced little hope on Sunday with no sign of a breakthrough as they headed toward a widely anticipated failure this week in their bid to cut a deal to reduce the U.S. deficit.

Lawmakers on the bipartisan 12-member "super committee" said they are not giving up ahead of a looming Wednesday deadline. But they appeared to be stepping up their blame game in the event they do not reach an agreement.

On NBC's "Meet the Press" program, neither Republican Senator Jon Kyl nor Democratic Senator John Kerry gave any indication a deal was near. They stuck to their parties' entrenched positions and blamed the other side for the deadlock.

Their comments and demeanor underscored the unlikelihood of a deal as the clock ticks down toward the Wednesday midnight deadline for the panel to vote on a package of at least $1.2 trillion in deficit reduction over the next decade.

If the two sides do not reach a deal, automatic spending cuts of $1.2 trillion over a decade are due to start in 2013.

The deadlock focuses on Republican opposition to tax increases, particularly on the wealthiest Americans, and Democratic refusal to cut into federal retirement and healthcare benefits without such tax increases.

"I say to my Republican colleagues: we are here all day. We are ready to do $1.2 trillion, not less than it. That's what we were told to do. That's the law," said Kerry, after accusing Kyl of not telling the truth about the talks.

Senior Democratic and Republican congressional aides said separately there was no movement toward a deal on Sunday morning. But the Democratic and Republican co-chairs of the super committee said they had not given up.

"I am at the (negotiating) table. I am ready to work with anybody who can say, that last divide, that they're willing to cross that," Democratic co-chair Senator Patty Murray said.

The panel was created in August out of a failure by President Barack Obama and Congress to reach a long-term deficit-reduction deal of around $4 trillion.

The super committee, with six Republicans and six Democrats, has until Wednesday to vote on a deal. The deadline to have a legislation written and presented to entire panel is Monday.

HOPE VERSUS REALITY

Referring to those looming deadlines, Representative Jeb Hensarling, the panel's Republican co-chairman, said on the program "Fox News Sunday": "Nobody wants to give up hope. Reality is, to some extent, starting to overtake hope."

But Murray said on CNN's "State of the Union" program that talks with Republicans were stuck on convincing them to agree to raise taxes on the wealthy to help bring down budget deficits that have surpassed $1 trillion in each of the last three years.

She said Republicans want to extend tax cuts that lowered individual rates -- reductions that originated under former Republican President George W. Bush. Those tax cuts run out at the end of 2012.

Republicans have pushed for a permanent extension, while Democrats want the tax cuts for the rich to expire.

Republicans want Democrats to agree to do more to find long-term savings in the growing costs of government retirement and healthcare programs.

If no deal is reached by a simple majority of the super committee, automatic spending cuts would start in 2013 -- two months after presidential and congressional elections.

Those cuts would be evenly divided between domestic and defense programs. Some Republican members of Congress already are talking about dismantling the automatic cuts to protect the Defense Department from deep reductions.

"To my ear, it sounds like a no deal," said Mark Zandi, chief economist at Moody's Analytics.

Zandi told "Fox News Sunday" that he does not expect much, if any, reaction by financial markets to a super committee failure because they already expect that outcome.

(Additional reporting by Lily Kuo, Writing by Deborah Charles)

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