Latest proposal to reduce deficit riles Democrats

WASHINGTON – President Barack Obama, pushing hard to close a grand deal to reduce the federal deficit, ignited a furor among congressional Democrats by appearing to back away from his insistence that spending cuts and revenue increases be included in the same package.

The White House briefed Democratic leaders on a possible $3 trillion deficit reduction deal, the latest in a rapid-fire series of proposals aimed at winning congressional approval for an increase in the nation’s borrowing limit before an Aug. 2 deadline.

But while an early version of the new plan would lock in cuts in spending and social programs that Republicans want, it appears to punt decisions on increasing tax revenues, favored by many Democrats, into 2012. Under the proposal, Congress would take up comprehensive tax reform next year. Democrats, though, are seeking enforceable measures to ensure that Republicans follow through.

White House aides scrambled through the day Thursday to tamp down a simmering revolt among Democrats, insisting that Obama had not agreed to forgo an increase in revenues. But the president at least for part of the day was in danger of losing support among his own party, including in the Democratic-controlled Senate.

A White House official was meeting with Democratic senators behind closed doors when word first spread about the proposed framework. The reaction was “volcanic,” said Sen. Barbara Mikulski, D-Md.

Obama summoned the Democratic congressional leaders, Sen. Harry Reid, D-Nev., the majority leader, and House Minority Leader Nancy Pelosi, D-Calif., to the White House for an evening meeting. The president also said in an NPR interview Thursday that revenue increases must be part of an agreement on the budget.

However, early outlines of the proposal appear to rely more heavily on spending cuts to make up the $3 trillion package.

As it is taking shape, the proposal also appears to differ from the $4 trillion “balanced approach” of spending cuts and new revenues Obama once sought. It also veers from the strict, $2.4 trillion package of spending cuts that many Republicans want.

Still, the new proposal would represent a sizable gain for Republicans, who want spending cuts in return for an increase in the debt ceiling, but abhor steps to increase revenues, which they call tax increases.

Few officials were willing to discuss how tax reforms might be addressed next year as part of the deal. One possibility described by Democrats would be mechanisms in the agreement known as “triggers” that require Congress to act on taxes, but officials involved in the negotiations would not provide details about them.

Democrats were deeply troubled by the prospect of a plan that would cut programs now, but wait until next year to act on taxes.

“If you’re doing any grand bargain, that has to include a revenue component that would have to be guaranteed and locked in,” said Rep. Christopher Van Hollen, D-Md., in an interview.

House Speaker John Boehner, R-Ohio, steadfastly denied that a deal was imminent. He walked cheerily through throngs of tourists in the Capitol, declining to answer the questions from reporters with more than a quip or a smile.

The spending cuts likely would affect every federal agency as well as programs like Medicare and Social Security that Democrats have fought to protect throughout debt negotiations.

A key question about the new proposal is its effect on the tax cuts enacted during President George W. Bush’s administration, which are set to expire in December 2012.

The White House wants to extend middle class tax cuts in the package, but not those for wealthy earners. Boehner never agreed to such offers over the weeks of negotiations.

Obama is not offering any deal without a revenue increase, according to a senior administration official who spoke on condition of anonymity to describe the talks frankly.

New revenue would be raised, the official said, but would not have to come from “new” revenue sources and could be achieved by allowing the Bush-era cuts to expire.

Another senior administration official said revenue could also come from “trigger” mechanisms in the agreement. The official would not elaborate about what actions might be triggered through such a mechanism.

Earlier this week, Obama tried to rally support behind a bipartisan Senate plan to cut spending, end tax breaks, close loopholes and lower overall tax rates. However, that plan’s $1 trillion in new revenues would have faced strong opposition among House Republicans.

Democrats and liberals are skeptical that Republicans would agree to increases in revenue once the spending cuts are instituted. Civil rights leaders visited the Oval Office on Thursday to argue that deep cuts in social safety net programs would hurt those already suffering.

Benjamin Jealous, president of the NAACP, and Marc Morial, National Urban League president, said afterward that they believe Obama understands that major changes to those social programs would be harmful.

The Senate today plans to vote on a House Republican plan that would cut spending and tightly cap future government budgets, a concession to conservatives that is not expected to pass.