Senior Democrat pushes firm line in U.S. budget talks

WASHINGTON Wed Oct 23, 2013 6:12am IST

U.S. Representative Chris Van Hollen (D-MD) speaks with reporters at the Reuters Washington Summit in Washington October 22, 2013. REUTERS/Jonathan Ernst

U.S. Representative Chris Van Hollen (D-MD) speaks with reporters at the Reuters Washington Summit in Washington October 22, 2013.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - A senior House of Representatives Democrat set down a firm marker on Tuesday for newly convened U.S. budget talks, saying his party would not agree to significant cuts in large social programs without increases in tax revenue.

Maryland Representative Chris Van Hollen, the ranking Democrat on the House Budget Committee, told the Reuters Washington Summit that he would be willing to consider some changes to big entitlement programs such as Medicare, the health insurance program for those 65 and older.

But Van Hollen said Republicans must drop their opposition to raising new revenue by closing various tax loopholes.

"It's hard to say you're serious about reducing the deficit if you're not prepared to close a single tax loophole in order to reduce it as part of a balanced approach," Van Hollen said.

When Congress last week ended a budget standoff that closed the federal government for 16 days and put the government on the brink of defaulting on its debt, a new panel of Democratic and Republican negotiators was formed to try to find common ground on a spending plan.

Amid highly charged partisanship, Congress has been unable to agree on the detailed budget plan since the blueprint for fiscal 2010 was approved four years ago.

The Republican-controlled House and Democratic-led Senate have instead resorted to a series of stop-gap measures, known as "continuing resolutions," to keep the government funded.

The negotiators - who include Van Hollen - will try to hammer out an agreement ahead of two new fiscal deadlines: a January 15 deadline to continue funding the U.S. government and a February 7 deadline to extend the government's borrowing authority.

The appointment of the 29-member budget conference committee led powerful Democratic constituencies - including the AFL-CIO labor organization and the AARP, which represents older Americans and claims a membership of 37 million people - to warn against cuts in entitlement programs such as Medicare and the Social Security retirement program.

THE DEBATE OVER ENTITLEMENTS

Analysts have said that making a significant dent in the U.S. national debt - which now tops $17 trillion - would be extremely difficult without trimming back entitlement programs, which account for about two-thirds of the budget.

Speaking at the Reuters Washington Summit on Tuesday, Mary Kay Henry, president of the Service Employees International Union (SEIU) labor organization, said it was "very important" to protect big entitlement programs for older Americans, the poor and the disabled.

But Bruce Josten, the top lobbyist for the pro-business U.S. Chamber of Commerce, told the summit a day earlier that it is crucial for the long-term health of the economy to tackle entitlements, which he said are the "main driver" of the nation's debt and deficits.

Van Hollen said he would be open to finding savings in Medicare in ways that focus on giving care providers incentives to cut costs. He said he would want to avoid changes that reduce the benefits that Americans receive.

One idea that would be a tough sell with Democrats is a change in the way that cost-of-living increases are calculated in Social Security. The change would be made by adopting a less-generous gauge of inflation, known as the "chained Consumer Price Index," or chained CPI.

Such a plan "creates a whole lot of problems within the Democratic caucus," Van Hollen acknowledged.

In a Wall Street Journal opinion piece on October 8, House Budget Committee Chairman Paul Ryan, a Wisconsin Republican and senior figure on the new budget conference committee, offered ideas for a possible deal on the budget, including requiring wealthier Medicare recipients to pay higher premiums.

Some Republicans have cited the "chained CPI" change for Social Security as one element of a possible deal. They note that the idea was proposed this year by Democratic President Barack Obama in his annual budget request to Congress.

'CHERRY-PICKING'

Van Hollen noted that Obama proposed such ideas only as part of a broader package that also included revenue increases.

"The president has been clear that his budget is a package deal; you can't go cherry-picking pieces out of his budget," Van Hollen said.

Van Hollen, who has participated in other efforts to reach a deal on deficit reduction including a failed 2011 "supercommittee," said it was too early to tell whether the new round of budget talks will succeed.

He said much depends on whether House Speaker John Boehner, the top Republican in Congress, decides to challenge Republican lawmakers aligned with the conservative Tea Party movement who resist any compromise with Democrats.

"The real question is whether Speaker Boehner will stand up to them, finally," Van Hollen said.

Absent any efforts to craft a broader budget deal, the panel's immediate task will be to try to find alternative budget savings to offset automatic "sequester" spending cuts for 2014, Van Hollen said.

He said a new round of sequester cuts starting in January may put more pressure on Republicans to find replacements because a large proportion of the reductions will fall on the military, a scenario many Republicans want to avoid.

The Congressional Budget Office said last month that if the automatic spending cuts were eliminated, the U.S. economy would generate 800,000 additional full-time jobs by the fourth quarter of 2014, and economic output would increase by 0.6 percent.

(Additional reporting by Paige Gance; Editing by David Lindsey and Will Dunham)

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