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U.S. budget negotiators far from deal, move behind closed doors

The U.S. Capitol dome is pictured in the pre-dawn darkness in this general view taken in Washington, October 18, 2013. REUTERS/Jonathan Erns
The U.S. Capitol dome is pictured in the pre-dawn darkness in this general view taken in Washington, October 18, 2013. REUTERS/Jonathan Erns

By David Lawder

WASHINGTON (Reuters) - U.S. budget negotiators said on Wednesday they were still far from an agreement and put off scheduling any other public meetings as talks to ease automatic spending cuts moved behind closed doors.

The 29-member congressional negotiating committee trying to set spending levels for fiscal 2014 has largely ceded negotiating authority to its top Republican, Representative Paul Ryan of Wisconsin, and its Democratic leader, Senator Patty Murray from Washington state.

"We've spent a lot of time talking about our differences," said Ryan. "That's the easy part. The hard part is figuring out where we agree."

Ryan said he and Murray would keep talking about the "parameters of a potential agreement," but offered no specifics on what that could entail. He has downplayed expectations for anything other than modifications to the "sequester" spending cuts.

A senior Republican aide said the discussions would continue in private and a third public meeting of the full budget panel would not take place until areas of potential agreement were identified, possibly after the November 28 Thanksgiving holiday.

Ryan raised the possibility the panel may not meet the December 13 deadline for an agreement, telling reporters, "It is not considered a hard-and-fast deadline."

He added that he and Murray would look for areas of "overlap" in savings between their partisan budget plans, which were passed earlier this year by the House and Senate. The plans are vastly different, with Ryan's relying heavily on deep cuts to social programs and Murray's increasing taxes by nearly $1 trillion on the wealthy and corporations.

Murray said she was "very encouraged" by her conversations with Ryan, but offered no specifics on where they might find common ground.

"They are going to continue in the days ahead and I'm hopeful we will get to a bipartisan compromise very soon," Murray added.

There are no immediate consequences if the December 13 deadline is missed, but a government spending extension expires on January 15, raising the threat of another government shutdown.

Senator Bernie Sanders, a liberal independent from Vermont, complained about the secret negotiations and vowed to stop efforts to cut the Social Security pension program and Medicare and Medicaid healthcare benefits. He presented Murray and Ryan with a petition signed by more than 700,000 Americans opposed to cuts in the programs.

"I'm not a great fan of background negotiations," Sanders told Reuters Insider Television. "I will do my best to make sure that we don't cut these very important programs, which are life and death to millions of Americans."

SMALL STEPS

Most of Wednesday's public meeting was essentially a hearing, with Congressional Budget Office Director Douglas Elmendorf as the sole witness. He told the lawmakers a larger budget deal that shrank long-term U.S. deficits would be beneficial to the economy, but acknowledged that was unlikely.

"Big steps are better than small steps, but small steps are better than no steps at all," Elmendorf said. "And no steps at all would be better than steps backwards."

Elmendorf gave the lawmakers a menu of 103 options for reducing the deficit that added up to more than $13 trillion over 10 years. Those range from canceling the F-35 Joint Strike Fighter for $37 billion of savings, to curtailing the deduction for charitable giving, a savings of $212 billion.

Many Republicans say they are willing to keep the $109 billion in across-the-board "sequester" spending cuts in place for 2014 rather than raise tax revenues - even if that means $19 billion in additional cuts for the U.S. military next year.

"Sequester is working," Senator Charles Grassley, an Iowa Republican, told the panel. "You can't raise taxes high enough to satisfy the appetite of Washington to spend money."

Still, some lawmakers are looking at ways to ease the Pentagon's pain, by shifting some of the deeper 2014 cuts to later years, smoothing them out over a decade, and selling some access to communications spectrum now reserved for the military.

Grover Norquist, the anti-tax advocate who heads the Americans for Tax Reform group, is pushing the latter idea and told Reuters that such a sale of airwaves could raise $20 billion to $50 billion. But he wants it reserved for military spending.

"New rule put on the table for the budget negotiations is if the Pentagon sells its spectrum, it gets to spend" the proceeds, Norquist said.

The only specific proposal offered at Wednesday's meeting came from Senator Angus King, who proposed replacing half the sequester cuts over eight years with about $255 billion in reductions to benefits programs and $200 billion in increased revenues from closing some corporate tax breaks.

Eliminating those breaks would provide a further $325 billion in revenues that could be used to reduce corporate tax rates and create a $50 billion infrastructure fund, said King, an independent from Maine. Calling it the "grande" plan after the medium-sized drinks at Starbucks, King said it would lower the corporate tax rate to 32.5 percent from the current 35 percent.

Ryan said he had not yet reviewed King's proposal, but would consider it.

(Additional reporting by Caren Bohan, Richard Cowan and Thomas Ferraro; Editing by Peter Cooney)

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