Lawmakers seek out more savings

WASHINGTON – The White House and key lawmakers are considering reductions in student loan subsidies, farm payments and support for federal workers’ pensions as they search for cuts that can clear the way for an increase in the national debt limit, according to officials in both parties.

The negotiations are still in the early stages, with no final decisions made, these officials said Wednesday. While the amounts involved so far are relatively modest, the talks led by Vice President Joe Biden appear likely to assume greater public prominence with the evident collapse of a freelance attempt by the “Gang of Six” senators to produce a sweeping bipartisan plan to reduce red ink.

“We’re talking (about cuts totaling) $200 billion, $150 billion and we have to get up into the trillion range or more,” said Sen. Jon Kyl, R-Ariz., one of six other lawmakers taking part in the talks at Blair House across the street from the White House.

The group has yet to discuss military spending or deeper reductions in programs that already were trimmed in legislation that narrowly averted a partial government shutdown in April.

Any discussion about savings from Social Security, Medicare and possibly Medicaid is likely to be set aside for President Barack Obama and Speaker John Boehner, R-Ohio, to handle.

Treasury Secretary Timothy Geithner has said Congress must raise the $14.3 trillion debt limit by Aug. 2 or risk a first-ever government default. Republican leaders, acknowledging the need for new borrowing authority, want cuts of at least the same magnitude as any increases as a way to gain control over future spending.

Some of the cuts under review were first advanced by the administration, and others were included in a budget that Republicans passed in the House last month. Negotiators are also looking to recommendations made by the National Commission on Fiscal Responsibility and Reform, appointed by Obama and headed by Erskine Bowles and former Sen. Alan Simpson.

Interest on student loans

Obama’s own budget proposes letting interest begin to accumulate on government loans to graduate students while they are still in school rather than begin accruing when they finish. The savings for the government are estimated at $18.1 billion over a decade, money the White House wants to use to expand Pell Grants for education.

Going one step further, Republicans want to allow interest to accrue on loans to undergraduates still in school, at a savings estimated at an additional $46.5 billion over 10 years. Unlike the White House, the GOP would apply all of the savings to deficit reduction.

Farm program savings

Republicans have called for $27.7 billion in farm program savings through the end of the decade, as compared with about $5 billion in Obama’s budget last February.

Both sides have called for savings from the crop insurance program and direct payment to farmers. Details are sketchy because the House Republicans omitted many from their budget and the White House has not released several of the specific recommendations that comprise a 12-year deficit-cutting plan Obama unveiled last month.

Federal pensions

The House budget written by Republicans recommends raising pension contributions by workers and cutting them for the government.

Obama made no such recommendation in his budget last February. Despite opposition from unions representing federal employees, several congressional officials say the White House has clearly said it will back some savings in the area.

Currently, most federal civilian workers contribute 0.8 percent of their wages to the fund that pays pension benefits, and the government contributes 11.2 percent of payroll.

Requiring workers and the government to contribute 6 percent apiece would save about $121.7 billion if implemented immediately, according to the House Budget Committee.