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Budget talks resume: Don’t expect much

By ALISTER BULL
May 24, 2011

U.S. Director of the National Economic Council Gene Sperling (L) and Director of the Office of Management and Budget Jacob Lew depart after meeting with a bipartisan group of lawmakers and Vice President Joe Biden to work on a legislative framework for comprehensive deficit reduction at the Blair House in Washington May 10, 2011. REUTERS/Jonathan Ernst

Talks to avert a potentially catastrophic U.S. debt default resume on Tuesday after signs Republicans might soften their stance over a key obstacle to a deal with Democrats, but hopes for a breakthrough remain slim.

Vice President Joe Biden leads senior lawmakers in their third round of negotiations to lift the $14.3 trillion U.S. debt limit before an August 2 deadline for action.

Top Republicans say Biden’s talks are laying vital groundwork for an eventual compromise on measures to reign in growth in the U.S. budget deficit, but President Barack Obama will ultimately be required to seal the deal.

No one expects anything to happen fast and the White House was not bothering to pretend otherwise.

“We have a lot of work ahead of us and quite a few weeks of discussions,” Jacob Lew, director of the White House Office of Management and Budget, told The Economic Club of Washington in remarks at a dinner on Monday evening.

Attention has shifted to Biden’s group after separate discussions among a group of six senators stalled last week.

Failure to increase the limit could force the United States to renege on its debt obligations, risking devastating fallout for the U.S. and world economy.

Republicans say they are open to a compromise on their plan to slash healthcare costs to help trim trillions of dollars from the U.S. budget deficit, in return for supporting a higher debt ceiling.

Democrats, led by Obama, say they too want to control spending, although they have criticized cuts proposed by Republicans as too drastic.

But Democrats also want to boost revenue by raising taxes, which Republicans flatly reject as part of a debt deal, a clear warning that financial markets should expect negotiations to push right up to the brink of default before a deal is done.

“I don’t think the most brilliant negotiators, with the best of intentions, can resolve this problem,” said Scott Lilly, a former congressional budget specialist and now a senior fellow with the Center for American Progress.

HEALTHCARE IN FOCUS

Republicans want deficit savings to match the amount the administration wants to raise the borrowing limit, and the U.S. Treasury sees a $2 trillion increase in the debt ceiling needed to last through the November 2012 elections.

The Tuesday session, which will be held on Capitol Hill, is expected to focus on healthcare spending, according to a source close to the discussions.

Analysts at the non-partisan Committee for a Responsible Federal Budget estimate that savings to the U.S. budget deficit of between $25 billion and $130 billion could be achieved over 10 years by increasing the costs to people in the Medicare healthcare program for the elderly.

Biden’s group has initially focused on areas where the two sides can most easily agree.

The Committee for a Responsible Federal Budget estimates that these areas could yield deficit savings of between $1 and $2 trillion over the next decade.

Biden’s group includes four Democrat lawmakers and two Republicans, including Eric Cantor, the No. 2 Republican in the U.S. House of Representatives.

Cantor said Biden’s group was only laying the groundwork for final talks between Obama, House Speaker John Boehner, the top Republican in Congress, and Senate leaders.

“We are engaging in these discussions right now in the Biden commission to really understand where both sides are,” Cantor told reporters on Monday.

The United States reached the congressionally mandated $14.3 trillion limit on its borrowing on May 16.

Administration officials are using special accounting measures to avoid a default for now but they warn their leeway to do that will run out on August 2.

(Additional reporting by Andy Sullivan and Rick Cowan)

Copyright © 2011 Reuters

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4 Responses to Budget talks resume: Don’t expect much

  1. Carl Nemo

    May 24, 2011 at 9:06 pm

    They need to cut spending bigtime along with raising taxes, like it or not. It’s been the succession of these Congressional crimpols over many years that have incurred this debt, all for political expediency. Now they don’t want to pay up which is the hallmark of a deadbeat, street level debtor.

    Summarily terminating uber spendy Obamacare, a big ‘haircut’ for Homeland Security and the curtailment of ‘engineered wars’ in three theaters of ‘conflict’ is the Rx. They need to chuck the ‘drug war too’ and start waging a “War against waste in fraud in government”.

    http://hoguenews.com/?p=4834

    Just looking at the photo of these smug, pompous a*sclowns prancing about with fat ring binders filled with duplicit, statistical based b.s. while “New Rome” burns is enough to make puke over the rail.

    It seems to me there’s forces at work that want to destroy the U.S. and the world’s financial system. One world currency along with a government of the same stripe seems to be the order of the day…no? / : |

    Carl Nemo **==

  2. woody188

    May 25, 2011 at 12:22 am

    Predators always go after the sick, the elderly, and the young.

    Looks like WWIII is the planned solution to the budget.

  3. bogofree

    May 25, 2011 at 9:26 am

    Until the culture of entitlements (including military) is addressed the debt will continue to spiral upwards. The Democrats have pledged to “protect” Medicare and SS which – IMHO – has zero to do with any egalitarianism and everything to do with playing to the choir. And, of course, the other side has their own special interests and the end result is the whole mess just gets passed on down the conveyor belt for future generations.

    • b mcclellan

      May 27, 2011 at 12:12 am

      Don’t mess with Vets. !
      You are out of line Sir.