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Sid in his law office where he sits when meeting with clients. Observant eyes will notice the statuette of one of Sid's favorite Democrats.

Saturday, February 19, 2011

To those progressives sending me nasty emails, know this: This is most unfortunate. - Talks to Cut Deficit Stumble In Heated White House Meeting

From The Wall Street Journal:

Top Senate Democrats tried to scotch efforts by Majority Whip Richard Durbin to include Social Security in comprehensive deficit-reduction negotiations, illustrating the challenge facing the bipartisan talks.

The discussion occurred during a closed-door White House meeting this week among negotiators including Democratic Senate Majority Leader Harry Reid of Nevada and Sen. Charles Schumer of New York, a key lieutenant.

President Barack Obama attended, although his contribution to the conversation couldn't be learned. Previously, the administration has offered general support for bipartisan debt-reduction talks.

The confrontation, as well as a flare-up on the right over taxes, illustrates the difficulty of reaching a deal on deficit-control legislation, and how fear of upsetting the party line on particular policies could trump the issue of controlling the debt.

Responding to public unease about the country's fiscal standing, six senators including Mr. Durbin are negotiating a deficit-reduction framework. They are betting that worries about federal red ink—expected to exceed $1.6 trillion this fiscal year—will put once-untouchable factors, such as entitlement spending and tax increases, into the mix.

One proposal, built off the presidential debt commission's recommendations, would establish caps on discretionary and entitlement spending. Lawmakers would then have to draft legislation to meet those caps or face automatic, across-the-board spending cuts if they fail.

On taxes, lawmakers would have two years to raise revenue by simplifying the tax code, killing deductions and credits and lowering overall rates. Under the deal being discussed, if Congress fails, provisions would kick in automatically to trim tax deductions.

If Democratic negotiators are forced to take Social Security out of the discussions, Republicans could counter by refusing to discuss tax changes that raise revenue. With only Medicare and Medicaid left, talks would likely collapse, said Erskine Bowles, a former Clinton White House chief of staff who co-led Mr. Obama's deficit commission last year. Limiting the scope of negotiations "is the exact wrong thing to do," Mr. Bowles said.

Sen. Tom Coburn (R., Okla.), one of those involved in the bipartisan talks said "purists on both sides" need to abandon their entrenched positions. For Republicans, that would mean ending or limiting hundreds of tax deductions and exemptions. For Democrats, the issue is Social Security. "For a deal to happen, Social Security needs to get fixed," Mr. Coburn said.

Sens. Reid and Schumer want any talk of changes to Social Security to be dealt with separately from the broader deficit-reduction talks. Mr. Schumer wants to protect the sizable number of incumbent Democrats facing elections in 2012 from having to make tough votes on the program.

Democratic interest groups have been gearing up for a fight on Social Security, and Messrs. Schumer and Reid don't want to get in the way. On Friday, Edward Coyle, executive director of the liberal Alliance for Retired Americans, accused House Republicans of threatening Social Security with the spending cuts they are pressing for the current fiscal year. But negotiators appear to be holding firm.

"If Sen. Schumer is serious about fighting to protect Social Security from harmful cuts, he can join the large group of Members already doing that," said a Senate official involved in the bipartisan negotiations. "But if he's trying to use Social Security as an excuse to do nothing to reduce the deficit, he's going to be pretty lonely."

A spokesman for Mr. Schumer, Brian Fallon, said the senator "believes it is vital to rein in the deficit, but Social Security is not the nub of the problem, and focusing on it distracts from any serious effort to bring the budget into balance."

The White House meeting Wednesday took place before The Wall Street Journal published an article Thursday detailing the Senate negotiations. The substance of the talks somewhat eased the concern of the Democratic leaders about Social Security, and gave Sen. Durbin some room to press forward, though without any commitment of support.

Aides familiar with the talks say Democratic leaders are willing to let them play out. A framework for deficit-cutting legislation could be circulated to a broader group of senators when they return early next month after a Presidents Day recess.

According to aides familiar with the bipartisan talks, Social Security is being treated gingerly. Under one proposal, lawmakers would be given two years to draft an overhaul to put the system on sounder financial footing. If that effort fails, Congress would be required to vote on the presidential debt commission's Social Security plan, which would raise the amount of income subject to Social Security taxes, gradually raise the retirement age and slow the annual growth of benefits.

Under the initial discussions, negotiators don't appear to be inclined to include penalties, should the Senate vote down any changes to Social Security.

For the first time since 1983, Social Security payouts exceeded Social Security taxes last year, according to the Social Security trustees report of 2010.

The government has borrowed billions of dollars from Social Security for decades, and the system owns enough federal bonds to keep it solvent until 2037, but as those bonds come due, the government will have to take money from the general Treasury to pay them off, adding another strain to the budget.

"We have a moral obligation to make sure Social Security will be solvent for the next 75 years," Mr. Bowles said, "and if we don't make these tough choices, it won't be."

Similar tensions are playing out on the right. Grover Norquist, president of Americans for Tax Reform, a conservative group, wrote to the three main Republican negotiators, Sens. Coburn, Saxby Chambliss of Georgia and Mike Crapo of Idaho, calling the putative deal a violation of the group's "no new taxes" pledge, which most Republican lawmakers have signed.

"There's no real bill to talk about with a tax increase," Mr. Norquist said of the deficit negotiations Friday.

The three senators fired back, saying their negotiations affirm "the oath we have taken to support and defend the Constitution of the United States against all enemies, foreign and domestic, of which our national debt may now be the greatest."


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