Debt panel poised to admit failure

Senate Minority Whip Sen. Jon Kyl, R-Ariz. speaks Senate Minority Whip Sen. Jon Kyl, R-Ariz. speaks to reporters on Capitol Hill in Washington. (Nov. 19, 2011) Photo Credit: AP

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WASHINGTON - A special deficit-reduction supercommittee appears likely to admit failure on Monday, unable or unwilling to compromise on a mix of spending cuts and tax increases required to meet its assignment of saving taxpayers at least $1.2 trillion over the coming decade.

The panel is sputtering to a close after two months of talks in which the members were never able to get close to bridging a fundamental divide over how much to raise taxes to address a budget deficit that forced the government to borrow 36 cents of every dollar it spent last year.

Members of the bipartisan panel, formed during the summer crisis over raising the government's borrowing limit, spent their time on Sunday in testy performances on television talk shows, blaming each other for the impasse.

In a series of television interviews, not a single panelist seemed optimistic about any last-minute breakthrough. And it was clear that the two sides had never gotten particularly close, at least in the official exchanges of offers that were leaked to the media.

Aides said any remaining talks had broken off.

"There is one sticking divide. And that's the issue of what I call shared sacrifice," said panel co-chair Sen. Patty Murray, D-Wash., on CNN's "State of the Union."

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"The wealthiest Americans who earn over a million a year have to share too. And that line in the sand, we haven't seen Republicans willing to cross yet," she said

Republicans said Democrats' demands on taxes were simply too great and weren't accompanied by large enough proposals to curb the explosive growth of so-called entitlement programs like Medicare and Medicaid.

"If you look at the Democrats' position it was 'We have to raise taxes. We have to pass this jobs bill, which is another almost half-trillion dollars. And we're not excited about entitlement reform,' " countered Republican Jon Kyl of Arizona on NBC's "Meet the Press."

Under the committee's rules, any plan would have to be unveiled Monday, but it appeared that Murray and co-chair Rep. Jeb Hensarling of Texas would instead issue a statement declaring the panel's work at a close, aides said.

"Put a bow on it. It's done," said an aide to a supercommittee Republican.

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Failure by the panel would trigger about $1 billion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget, starting in 2013, according to the Congressional Budget Office. This action, called a "sequester," would also generate $169 billion in saving from lower interest costs on the national debt.

Defense Secretary Leon Panetta says the required cuts of up to $454 billion to the Pentagon would be "devastating" and leave a "hollow force," and defense hawks of Capitol Hill promise to unwind them. But that effort will be complicated by the insistence of other lawmakers that the overall amount of the budget cuts be left in place.

"I can't imagine that, knowing of the importance of national defense, that both Democrats and Republicans wouldn't find a way to work through that process so we still get the $1.2 trillion in cuts, but it doesn't all fall on defense," said supercommittee Republican Sen. Jon Kyl of Arizona.

The panel's failure also sets up a fight within a battle-weary, dysfunctional Congress over renewing a payroll tax cut and jobless benefits for the long-term unemployed, both of which are set to expire at the end of the year. Both proposals are part of President Barack Obama's $447 billion jobs plan.

Extending the current 2 percentage point payroll tax cut isn't a popular idea with many Republicans, but allowing it to expire could harm the economy, economists say. So too would a cutoff of unemployment benefits averaging about $300 a week to millions of people who have been out of work for more than six months.

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Serious negotiations ended Friday after Democrats rejected a $644 billion offer comprised of $543 billion in spending cuts, fees and other non-tax revenue, as well as $3 billion in tax revenue from closing a special tax break for corporate purchases of private jets. It also assumed $98 billion in reduced interest costs.

Officials familiar with the offer said it would save the government $121 billion by requiring federal civilian workers to contribute more to their pension plans, shave $23 billion from farm and nutrition programs and generate $15 billion from new auctions of broadcast spectrum to wireless companies.

Democrats said the plan was unbalanced because it included barely any tax revenue.

"Our Democratic friends are unable to cut even a dollar in spending without saying it has to be accompanied by tax increases," Kyl said.

On Saturday, Sen. Rob Portman floated an even smaller plan, said a lawmaker directly familiar with the panel's work. It, too, was rejected. The lawmaker required anonymity because of the secrecy of the talks.

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The committee faces a Wednesday deadline. But members would have to agree on the outlines of a package by Monday to allow time for drafting and assessing by the Congressional Budget Office.

Over the past couple of weeks, the two sides have made a variety of offers and counter-offers, starting with a more than $3 trillion plan from Democrats that would have increased tax revenues by $1.3 trillion in exchange for further cuts in agency budgets, a change in the measure used to calculate cost-of-living increases for Social Security beneficiaries, and curbs on the growth of Medicare and Medicaid.

"We put on the table a proposal that required tough compromises on both sides, and they never did that," said Rep. Chris Van Hollen, D-Md., the only House Democrat on the panel to participate in late-stage bipartisan talks.

Republicans countered with a $1.5 trillion plan that included a potential breakthrough — $250 billion in higher taxes gleaned as Congress passes a future tax reform measure. The plan was trashed by Democrats, however, who said it would have lowered tax rates for the wealthy too far while eliminating tax breaks that chiefly benefit the middle class.

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