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Battle on tax hikes next

WASHINGTON — Congress and President  Obama beat the deadline for raising the nation's debt ceiling by just a few hours Tuesday, but they hardly ended the clash over the size and reach of government. The next confrontation promises to be at least as contentious as the one they just finished.

Congressional leaders have two weeks to name members of a special 12-member legislative panel that's assigned under the debt-limit law Obama signed Tuesday to find ways to cut the government's budget deficit by as much as $1.5 trillion by Nov. 23. That number can be reached by reductions in spending and increases in revenues, and the brawl over how to do that already has begun.

"We've had too much talk (from) Republican leaders in the Senate saying there will be no revenue. That's not going to happen," said Senate Majority Leader Harry Reid, D-Nev. "The only way we can arrive at a fair arrangement for the American people with this joint committee is to have equal sharing."

Republicans signaled that they have a different view, and it doesn't include higher taxes.

"The answer to this is not giving the government more money to spend," said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.


The Senate ended the latest phase of the budget battle Tuesday by voting 74-26 to increase the $14.3 trillion debt limit — failing to do so could have triggered a government default — and to cut federal spending by trillions. The first reductions are aimed at reducing federal deficits by $917 billion over the next decade. The bill, which the House of Representatives had approved Monday, was sent immediately to Obama, who signed it.

The president called the weeks-long standoff over raising the debt ceiling "a manufactured crisis" that didn't help a faltering economy.

Democrats are furious that tax revenues weren't part of the package, and the president pledged to continue to press for tax increases to help balance the budget.

"Everyone is going to have to chip in. It's only fair," Obama said in a Rose Garden address, singling out subsidies to oil and gas companies and tax loopholes. "That's the principle I'll be fighting for during the next phase of this process."

How the 12-member panel will decide to trim the deficit by $1.5 trillion over 10 years is anybody's guess. Without an agreement, which Congress then must approve without any amendments by Dec. 23, the debt-ceiling law would impose cuts automatically on so-called discretionary spending programs, including the defense budget.

Indeed, it's still unknown even how most of the members of the panel will be selected.

Senate Republican leader Mitch McConnell plans to interview applicants, but the other legislative leaders — Reid, House Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-Calif., haven't described their selection plans. Each will name three members to the panel.

Obama doesn't have a say in the committee's makeup, but White House press secretary Jay Carney said the president would "make his opinion known" that the committee needed to consider tax revenue as well as spending cuts and changes to entitlement programs such as Medicare.


"To stack the membership with folks who don't want to get anything done you might think is a fine political tactic if there was no consequence to that, but there is," Carney said, noting that without an agreement that can clear Congress, the committee risks setting off the "very onerous actions" of the trigger.

In the past, such panels have been staffed by lawmakers who were well-versed in budget matters but loyal to the leadership.

For instance, in spring talks on the debt ceiling headed by Vice President Joe Biden, Republicans were represented by House Majority Leader Eric Cantor of Virginia and Senate Republican Whip Jon Kyl of Arizona, considered conservative hard-liners.

Democrats included Rep. Chris Van Hollen of Maryland and Jim Clyburn of South Carolina, who's the top Democrat on the House Budget Committee and the assistant minority leader — both of them close to party leaders — as well as Sens. Max Baucus of Montana and Daniel Inouye of Hawaii, key committee chairmen.

That committee illustrated the promise and problems Congress faces on fiscal matters. After about six weeks of meetings, it came up with a package of cuts that became the model for those in Tuesday's law.

But it broke up when Cantor refused to attend any more meetings because Democrats were insisting on including more revenue.

Lawmakers hope that such an outcome is less likely this time, because a breakdown in talks would trigger cuts not just in programs Democrats favor, but also in those, such as defense spending, that Republicans champion.

Under the terms of the debt-ceiling pact, if the 12-member legislative committee can't reach a deal that Congress will approve, half the automatic cuts would come from the defense budget and half from other domestic programs, such as education, housing and transportation. The cuts would begin in 2013.


But major portions of the federal budget would remain off-limits, including Social Security, Medicaid, military and civilian federal pensions, and most low-income programs. Cuts in Medicare would be limited to payments to providers.

Once those reductions are enacted, the debt limit would go up by at least another $1.2 trillion, which is expected to give the government enough borrowing authority through 2012.

Still, with the 2012 elections now 15 months away, it may be all but impossible to get Republicans to accept tax revisions they view as hikes or Democrats to make cuts in programs such as Medicare or Social Security.

And there were signs that the parties' positions already were solidifying.

"Meeting the ... goal will not be easy, but it is achievable. Achievable, that is, if those who have so far been unwilling to compromise can recognize that revenue must be part of the equation," said Sen. Carl Levin, D-Mich.

Sen. Jeff Sessions of Alabama, the top Republican on the Senate Budget Committee, took a completely different approach, saying that even the $1.5 trillion called for was "an insufficient number." He criticized not only the agreement, but also the process established to provide more savings.

"The new normal in Washington has become panic-driven eleventh hour votes in which members are told to fall into line before pandemonium ensues," he said. "This is no way to run the Congress or to run the government."

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