Contentious U.S. budget talks point to small deficit-cut deal

March 14, 2013|Reuters

* Federal pensions, chained CPI among possible savings

* Republicans holding firm against tax increases

* Frank talk at a glitzy dinner

By Richard Cowan and David Lawder

WASHINGTON, March 14 (Reuters) - As divisions over major
reductions in federal budget deficits solidify, President Barack
Obama and members of Congress on Thursday began weighing limited
steps that might be brokered in a bipartisan deal later this

Obama spent much of Thursday afternoon on Capitol Hill,
first meeting with Republican senators and then huddling with
fellow Democrats in the House of Representatives.

Despite nearly two weeks of outreach to lawmakers, Obama and
Republicans seemed nowhere closer to agreeing on a large
deficit-reduction deal by mid-year.

Instead, Republicans and Obama's Democratic allies in
Congress engaged in partisan rhetoric, even as the president was
striking a moderate tone in his private meetings with Republican

"The president's idea of compromise is, 'Just do it my way.'
That's just not going to work," House Speaker John Boehner, a
Republican, told reporters.

Obama has been calling for more tax hikes on the rich,
coupled with new spending cuts, to help curb budget deficits
that have exceeded $1 trillion in each of the last four years,
in part because of the weak economy.

"No more tax hikes," Boehner added, referring to the more
than $600 billion in new revenues Obama won at the beginning of
this year by raising income taxes on the wealthy.

House Democratic leader Nancy Pelosi, noting the yawning gap
between her party and Republicans on the functions of
government, told reporters: "This is a bigger difference than I
have seen ... well I've never seen anything quite like it. I
don't think anybody has seen anything quite like it."

And so some lawmakers have begun hinting at more incremental
steps if Republicans cannot swallow any more tax hikes for
deficit reduction and Democrats cannot deliver on the
"entitlement" program reforms Obama has dangled.

The latter could include changes to the Social Security
retirement program and Medicare and Medicaid healthcare for the
elderly, disabled and poor.

"You set aside differences and you find where you can work
together. That's what we ought to be doing," House Majority
Leader Eric Cantor said on Wednesday after his fellow
Republicans met privately with Obama.

A senior House Republican aide said one such idea is cutting
federal workers pensions, putting them more in line with private
sector retirement funds. Democrats in the past have acknowledged
this is an area that could be ripe for reform.

Meanwhile, Pelosi and Senator Dick Durbin, the
second-ranking Senate Democrat, both expressed a willingness to
look at changes to how cost-of-living benefit increases are
calculated in order to save money.

"I'd have to say if we can demonstrate that it doesn't hurt
the poor and the very elderly, let's take a look at it," Pelosi
told reporters.

Durbin warned that "some senators will never, ever consider"
the change, which is called "chained CPI." But he too said it
was "worth looking at" as part of any effort to restore the
solvency of Social Security.

An estimated $340 billion could be saved over 10 years with
the new method for calculating cost-of-living increases that
proponents say takes into account more real-world estimates of
the cost of consumer goods.

Part of the budget savings also would come from higher
revenues collected as tax bracket thresholds do not keep pace as
closely as they do now with rising incomes.


Meanwhile, as chances dim for a comprehensive reform of the
U.S. tax code as part of this year's budget negotiations, Obama
has told Republicans in both chambers that he favors a
revenue-neutral reform of corporate taxes.

That conversation went a step further on Thursday when the
president and Republican senators talked about the possibility
of doing corporate tax reform as a stand-alone fix, instead of
folding it into more far-reaching reforms as had been assumed.

All of this talk of limited steps has some lawmakers

Republican Senator Rob Portman of Ohio, a former Bush
administration budget director, told Reuters that a
deficit-reduction deal of between $1.5 trillion-$2 trillion is
the minimum necessary to stabilize the nation's debt at a safe
level. This would be on top of the $1.2 trillion in automatic
spending cuts over 10 years that began to take hold on March 1.

"A lot of people are talking about a lot less than that,"
Portman said.

Obama embarked on his private sessions with Republicans
after a couple of them signaled a willingness to accept higher
taxes to help reduce budget deficits.

One congressional aide said the intimate meetings were aimed
at gauging just how deep support might be among congressional

Obama got a bleak assessment last Saturday night, in the
midst of the "Gridiron Club" white-tie dinner, which Obama
attended. He was seen holding a sustained conversation with
House Republican Whip Kevin McCarthy.

A source who asked not to be identified said that McCarthy
thanked the president for reaching out to Republicans on the
budget issue. Obama, the source said, told McCarthy that he
would talk to more people than just Boehner, a change from
previous budget negotiations.

McCarthy then told Obama, according to the source, "'It
doesn't matter who you talk to, if you keep talking about tax
revenues, you're going to get the same answer."

And that answer appears to be "no."