WASHINGTON – With just 10 days left before a Thanksgiving deadline, members of a congressional supercommittee appear increasingly pessimistic about the odds of forging a debt-reduction deal, despite an unprecedented offer by Republicans to raise taxes.
The public debate has grown more divisive since both sides laid out new offers last week. Negotiators, already under attack from the left, face new pressure from the right. Calls of betrayal are expected to intensify today when the House returns from a break, fueling concerns that a deal could emerge from the supercommittee only to die in the House or the Senate.
On Sunday, Rep. Jeb Hensarling, R-Texas, the supercommittee’s GOP co-chairman, said he hasn’t “given up hope” that the panel can reach a deal to cut borrowing by at least $1.2 trillion in the next decade. But he also saw the prospect of failure.
“It’s been a roller coaster ride,” he said on CNN.
Sen. Patrick Toomey, R-Pa., the main author of the GOP offer, was somewhat more encouraging. Talks have reached “a difficult point,” he said on Fox News. “I think we’ve got a ways to go.”
Still, the gap has narrowed. Republicans have offered a $1.2 trillion deficit-reduction package that would cut spending by about $750 billion over the next decade while raising about $500 billion in revenue, including about $300 billion in new taxes. Democrats have offered to trim borrowing by $2 trillion, with that sum divided between spending cuts and tax increases.
“I think that there will be further erosion of what little confidence remains of our federal government” if the supercommittee fails, Toomey said.
Financial analysts agree. When Congress created the supercommittee in August as part of legislation to raise the federal debt limit, global investors focused on the European debt crisis as their foremost concern. But with the formation of new governments in Greece and Italy, the U.S. stalemate may again draw investors’ attention.
If the supercommittee can’t forge consensus, the law requires that $1.2 trillion in automatic, across-the-board cuts be made to agency budgets, including the Pentagon, starting in January 2013. As long as that trigger remains in effect, the government will be on track to reduce future borrowing.
But analysts said the U.S. may risk another downgrade of its credit rating and do more damage to business and consumer confidence if the process implodes – for example, if a deal is approved by the supercommittee but is killed on the House floor. Analysts are deeply concerned that lawmakers could “de-trigger” the automatic cuts, undoing even the modest steps Congress has taken to tame the soaring debt.