Deficit deal likely to be “universally distasteful”

WASHINGTON – With less than a month to go before the federal government exhausts its cash cushion, congressional leaders plan to meet again this weekend with President Obama to hash out a deal renewing the Treasury’s borrowing authority and linking the agreement to a long-term plan to reduce budget deficits.

Confronted with the possibility that their leaders have put both parties’ sacred cows on the table, Republicans and Democrats eagerly sought to stake out what would and wouldn’t constitute an acceptable deal.

For example, Democrats want new revenue to make up a portion of the deal and have proposed closing tax loopholes to do so in the face of Republican opposition to higher tax rates.

“I’m not opposed to closing tax loopholes but it should be in conjunction with lowering the rates,” said Republican Rep. John Kline, a close ally of House Speaker John Boehner. Kline said any such deal should be “revenue neutral” so that closing the budget deficit is achieved only through spending cuts.

Meanwhile, House Democrats are angry that President Obama has floated the possibility of cuts to Social Security and Medicare benefits. Minority Leader Nancy Pelosi took her concerns to the White House for a meeting this morning.

At a hastily-scheduled Friday afternoon Democratic caucus meeting, Pelosi told House Democrats that she warned Obama the caucus was “firm” about not wanting benefit cuts.

Although House Democrats have one of the smallest minorities in recent congressional history, they may have some leverage over the final shape of an agreement. As many as 50 House Republicans, including recently-announced presidential candidate Rep. Michele Bachmann, are expected to vote against an increase in the debt ceiling under any circumstances.

Liberal Democrats such as Twin Cities Reps. Keith Ellison and Betty McCollum are likely to oppose any deal weighted heavily toward spending cuts and reduced entitlement program spending. But centrist and conservative Democrats such as Minnesota’s Tim Walz and Collin Peterson may provide the crucial votes to pass any deal in the House.

“The gutting of Medicare and benefit reductions to simply preserve tax cuts, if you will, is not something I’m open to,” said DFLer Tim Walz, who represents a conservative-leaning district in southern Minnesota, after the meeting.

Walz said the first half of the caucus meeting centered around another topic that’s likely to make it into a final deficit-cutting deal: Medicaid, the joint federal/state program that provides health insurance to uninsured children, the very poor and some seniors.

One proposal floating around Washington policy circles for the program would involve altering the formula the federal government uses to pay its portion of Medicaid to the states to cut its outlays by $50 billion between 2015 and 2021.

Some Democratic governors are sufficiently worried about the possible changes to Medicaid that they called Pelosi and Minority Whip Steny Hoyer today to voice their concern that states would have to make up the funding gap if the federal contribution shrinks.

“Many of the things they’re proposing like this issue will end up costing more,” Walz said, who said he’s also keeping an open mind about any and all entitlement changes to cut the budget deficit.

A permanent deficit deal, Walz said, “will probably be universally distasteful to a lot of folks.”

  • Rich

    If there is something in it for everyone to hate, the I’m all for it. Democracy is sharing the pain…