Bloomberg News

$4 Trillion Deficit Deal Still Possible, 2 U.S. Lawmakers Say

November 14, 2011

Nov. 5 (Bloomberg) -- A “bold” deficit-reduction deal worth $4 trillion is possible, say two influential lawmakers, one a Democrat the other a Republican, who expressed willingness to compromise over their previous positions on taxes and spending.

Representative Xavier Becerra, a California Democrat who last year voted against a plan put forth by President Barack Obama’s debt commission, said this time he is prepared to back something close to it as long as about one-third of the plan includes higher revenue.

A “balanced” plan is “something that Americans can look at and feel it and say, ‘You know what, I think I gave -- put a little bit of skin in the game, but so did so-and-so,’” Becerra, a member of a congressional deficit-reduction supercommittee, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

Representative Mike Simpson, an Idaho Republican who sits on the House Budget Committee, said he is willing to accept tax increases as part of a major deficit-reduction package.

Simpson, also speaking on “Political Capital,” said he favors a plan cutting between $4 trillion and $6 trillion over the next decade and that, while he’s “personally, fine” with $3 in spending cuts for every $1 in new revenue, he might consider a lower ratio.

“You can’t do it with just entitlement reform, you can’t do it with just discretionary spending and you can’t do it with just tax increases,” said Simpson. “You need all of those on the table.”

‘Not Balanced’

Becerra said a 3-to-1 ratio of spending cuts to new revenue, “is not balanced,” while signaling he might be receptive to a 2-to-1 ratio. “Show me the two and the other one,” he said.

On spending for entitlements such as Medicare or Social Security, Becerra and Simpson said those programs are part of the deficit-reduction discussion.

Simpson said the supercommittee should tackle Social Security as well as Medicare. “If we don’t do something, they won’t be here for future generations,” he said.

Becerra declined to give specifics on what he would cut, saying “it would be wrong” to “protect this particular interest” because “everything should be on the table.”

Democrats have balked at cutting entitlements without revenue increases, and Republicans want what House Speaker John Boehner calls “real reform” of those programs before they agree to any revenue increases.

Simpson-Bowles

Obama’s debt commission, led by former Republican Senator Alan Simpson and Erskine Bowles, who was President Bill Clinton’s chief of staff, debated a plan that would have cut roughly three times as much spending as it raised in new revenue, if reduced interest payments on the debt are included in the cuts.

The $3.9 trillion, 10-year Simpson-Bowles plan envisioned about $2.2 trillion in spending cuts, $673 billion in reduced interest payments, and $1 trillion in tax increases.

Becerra said that while he had opposed the commission’s recommendation, it could be “the ultimate template that we use for a solution” in the supercommittee.

Becerra, 53, the vice chairman of the House Democratic Caucus, is one of three House Democrats on the 12-member supercommittee, equally composed of lawmakers of both parties and both legislative chambers of Congress. The panel must find at least $1.2 trillion in deficit cuts.

Insufficient Amount

Both he and Simpson dismissed that figure as insufficient.

“We can get it done in ways that are not just $1.2 trillion worth of savings. We could make it big,” Becerra said. “Big and bold.”

Simpson said the $1.2 trillion in savings “just kicks the can down the road.” He called the deficit “the biggest issue we face in this country,” and said “if we don’t solve this problem -- we’ve got one chance, and if we don’t do it, I think you’re going to see our economy go through the floor.”

A plan to promote short-term jobs growth “should be part of this,” Becerra said. More jobs will produce more tax revenue, further helping cut the deficit, he said. “You’ve got to make the economy work before you can really expect to get the deficits down and get us back to balance,” he said.

Simpson said it’s possible to combine long-term deficit reduction with short-term job creation.

Outside the Mandate

Boehner, an Ohio Republican, told reporters jobs legislation is outside the supercommittee’s mandate. He and other Republicans argue that cutting the deficit will restore business confidence which, in turn, will lead to more jobs.

Putting Social Security on a secure fiscal path “is probably the easier thing to handle,” Becerra said. Fixing the old-age income-security program “easily could be” included in a deal that “takes a long-term approach to find balance.”

Talks are deadlocked and supercommittee members, facing a Nov. 23 deadline to produce legislation that would receive up- or-down votes in the House and Senate, said they planned to work over the weekend in Washington or via telephone to seek a solution.

Simpson, 61, said Republicans ought to ditch their anti-tax vows. He said he signed an anti-tax pledge sponsored by Grover Norquist when he first ran for Congress in 1998 because, “when you first run for Congress,” you “get these pledges and ‘yeah, I’m not in favor of tax increases -- I’ll sign that pledge.’”

“I didn’t know I was signing a marriage vow with this,” said Simpson.

--Editors: Robin Meszoly, Jim Rubin.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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