Senate Republicans say the supercommittee may go home without going big. Larger deal may elude deficit panel

A month into the supercommittee’s term, Senate Republicans are telling K Street that they don’t believe the powerful deficit-cutting panel can reach a “grand bargain” agreement, sources familiar with the negotiations say.

In a closed-door meeting with Republican lobbyists late last week, senior policy advisers representing both Senate Minority Leader Mitch McConnell (R-Ky.) and his chief deputy, Jon Kyl (R-Ariz.), who sits on the special deficit panel, said the issue of tax increases may be an insurmountable obstacle in the secretive talks.


The two top Senate Republicans don’t think such a grand bargain style plan — in the range of $3 trillion to $4 trillion in cuts over 10 years coupled with tax and entitlement reform, similar to the proposal that was under consideration by House Speaker John Boehner (R-Ohio) and President Barack Obama during the summer — could succeed because all of the existing proposals contain tax increases they consider “significant” and are, therefore, politically untenable, officials say. Republicans say there are certain “fees” that can be instituted to raise some revenues, an idea that was considered during the failed deficit-reduction talks led by Vice President Joe Biden.

But the only way that a grand bargain could pass muster with the GOP, the Senate Republican aides say, is if it were tied to an overhaul of Social Security or the controversial proposal by Rep. Paul Ryan (R-Wis.) to turn Medicare into a voucher-based system for future recipients. And neither plan could pass this Congress, they believe.

After four private meetings and two public hearings, Kyl is convinced that the three House Democrats on the supercommittee — Reps. Jim Clyburn of South Carolina, Xavier Becerra of California and Chris Van Hollen of Maryland — are not interested in a deal on taxes because of their demands for more revenue, sources say. Kyl has not ruled out taking up tax reform as part of any supercommittee proposal, although he knows time is running short on those deliberations.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.), both of whom serve on the supercommittee, have been holding private talks on the issue of tax reform, and Boehner has pushed for the panel to include the outlines of a major overhaul of the U.S Tax Code in any final agreement, but whether that will lead to substantial progress on the issue is unclear.

McConnell’s aides continue to believe the most realistic outcome for the supercommittee is to reach the $1.2 trillion target for cuts called for by the law that created the elite panel, which the Republicans believe will still be a tall order, sources familiar with the discussions say. And if the supercommittee can’t reach the $1.2 trillion target, McConnell and Kyl aides made clear that they believe Congress would not allow a painful round of automatic across-the-board budget cuts, including $400 billion in Pentagon reductions, to take effect in 2013.

The grim prognosis by top Republican officials sheds some light on GOP thinking heading into a crucial round of supercommittee negotiations, which continue Monday evening. As calls mount for the panel to “go big” and to find enormous cuts and revenue increases to stabilize the country’s finances, the Senate GOP leaders seem concerned that such a solution could damage both the sluggish U.S. economy and the Republican Party heading into the 2012 elections.

Despite having held several long negotiating sessions already, the most urgent phase of the supercommittee’s work won’t happen until the second week of October. Any deal by the panel will thus need to be finalized quickly — and scored by the Congressional Budget Office — in order to meet the Thanksgiving deadline for legislation. And there is no indication that hot-button policy fights, such as the level of discretionary spending cuts, taxes and entitlement reform, are close to being resolved.

Kyl’s office did not dispute the characterization of the lobbyist briefing but declined comment further. A McConnell spokesman noted that the Kentucky Republican has “never said their mandate is to get a $3 trillion deal. Their mandate is to get $1.2 trillion.”

The aides’ comments to lobbyists are in line with the GOP leaders’ public projections. At the first supercommittee public meeting last month and in comments to reporters, Kyl has publicly voiced doubt on calls to go beyond the goal to find between $1.2 trillion-$1.5 trillion in cuts, citing time constraints and the philosophical divides between the two parties. McConnell has said he’s not going to “prejudge” the committee’s outcome.

“The committee is structured to succeed,” McConnell said recently. “And we fully anticipate they will meet their goals.”

Congressional aides from both parties noted that McConnell, Boehner, Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) have not met since the supercommittee negotiations began, and neither Boehner nor Reid have signaled, either publicly or privately, to the heads of the special bipartisan panel — Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas) — that they are prepared to cut any deal, at least not yet, said congressional insiders.

While a majority of the 12 supercommittee members can approve a deal, which would fast-track its recommendations for a vote in both chambers and couldn’t be amended or filibustered, the four congressional leaders will decide whether any agreement is possible.

“Everybody is under the belief that Pelosi doesn’t want to do anything,” said a Democratic aide familiar with the deficit panel’s internal dynamics. Pelosi is adamantly opposed to changes in Medicare’s benefit structure, and House Democrats hope to exploit the Ryan budget proposal — passed without any Democratic support — for seeking to “end Medicare as we know it.”

Pelosi aides say the California Democrat’s only condition for the supercommittee talks is whether any final agreement will help spur job growth and the economy.

“I think our only sacred cow has to be the creation of jobs for the American people and creation of jobs now,” Pelosi said on Sept. 15.

In a brief interview recently, Reid refused to say whether he thought the panel should “go big.” Reid ran his reelection campaign in 2010 on the promise to protect entitlement programs, particularly Medicare and Social Security.

“They’re my appointments,” Reid told POLITICO of Murray, Baucus and John Kerry of Massachusetts, who represent Senate Democrats on the panel. “They’re making the decisions — not me.”

Still, Murray and Hensarling regularly brief their respective party leaders on the progress of the supercommittee’s meetings, say GOP and Democratic aides, as are staffers assigned to the Joint Select Committee on Deficit Reduction, as the panel is formally known.

“Right now, they’re still doing the big dance,” said a GOP leadership aide. “The next couple weeks will show whether there is any deal possible.” The supercommittee has until Nov. 23 to issue legislation, with votes in the House and Senate to take place within a month of that deadline.

Yet the prospects for reaching a major agreement remain slim, thanks to the huge partisan and ideological divide between the two parties as they jockey for political advantage heading into an election year.

Boehner bitterly battled Obama, Reid and the Democrats over taxes and spending as part of the debt ceiling increase fight this summer, and the U.S. government was pushed to the brink of default on its $14 trillion-plus debt. Just last week, Boehner and Reid clashed over a continuing resolution to keep the federal government open beyond the end of fiscal 2011, raising the specter of a shutdown.

That deadline was pushed off until mid-November, shortly before the supercommittee’s deadline. Obama has pushed for immediate congressional action on his $447 billion jobs bill and wants the supercommittee to figure out ways to cover the costs of his plan.

But neither Reid nor Boehner has shown much appetite to immediately take up that proposal.

Adding to the complication of reaching a “big deal” is the threat by Obama that he will veto any plan that doesn’t ask millionaires or corporations to pay more in taxes while reducing Medicare benefits. Republicans, for their part, have refused to consider any increase in marginal tax rates, even on the wealthiest Americans.