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Awkward Hearing Set for Deficit Panel

With no clear indication they can address taxes or entitlements, members of the Joint Committee on Deficit Reduction are set for an awkward public session today as a veteran and bipartisan cadre of budget experts likely will insist any meaningful deal must address both.

Former Sen. Alan Simpson (R-Wyo.) and former White House Chief of Staff Erskine Bowles, as well as founding Director of the Congressional Budget Office Alice Rivlin and former Senate Budget Chairman Pete Domenici (R-N.M.) will testify about their two sweeping bipartisan budget plans. The Simpson-Bowles and Rivlin-Domenici frameworks contain serious entitlement reform and tax code overhauls.

No one close to the deficit panel suggests the statements from the four budget bigwigs will change the trajectory of the special panel. But, at a minimum, the two bipartisan pairs’ willingness to consider the sacred cows of both parties will shine an uncomfortable light on a panel looking more likely to deadlock at this point than to “go big,” as many Congressional leaders and policymakers have suggested.

The hearing comes on the heels of last week’s dueling, behind-closed-doors presentations from the panel’s Democrats and Republicans that left both sides unsatisfied and Congressional aides concerned that the parties are far apart with little time to bridge large policy gaps. It also could provide an opening for the committee’s Democrats, especially, to intensify their calls for a “balanced approach” between revenues and entitlement cuts in front of the C-SPAN cameras.

“It will be very helpful to hear from them tomorrow,” super committee member Rep. Chris Van Hollen (D-Md.) said in an interview Monday with MSNBC, adding that the hearing will feature “both bipartisan groups that also concluded … that in order to reach a deficit reduction agreement, you need to take that balanced approach. You need cuts, yes, but you also need to have the revenue piece.”

The two offers from both parties made last week were starkly different in how they would deal with raising revenues to pay down the debt. The fact that “tax” has become such a dirty word and has been replaced by and large with the word “revenue” could be working against Democrats’ efforts.

The Democratic proposal aimed to bring in $1.3 trillion worth of revenue in two phases. The first $300 billion would come in the form of what sources have called a “down payment” and would include incentives to Republicans such as a “chained” consumer price index, which raises money for the government by changing how it calculates inflation in relation to programs such as Social Security. Such a provision also has been part of previous bipartisan initiatives, such as the Bowles-Simpson and Rivlin-Domenici plans.

The second, much larger slice of revenue would come from changing the tax code. Under the Democrats’ plan, the joint committee would instruct the House Ways and Means and Senate Finance committees — chaired by deficit panel members Rep. Dave Camp (R-Mich.) and Sen. Max Baucus (D-Mont.) — to find an additional $1 trillion in savings by overhauling the tax code.

The Republican plan also includes $40 billion in revenue raisers from a chained CPI. Most of its other revenue claims, however, come not from tax changes but from bringing billions of dollars back to the government through Medicare cuts, other mandatory savings such as cuts to agriculture subsidies and spectrum sales, as well as dynamic scoring.

The Bowles-Simpson Commission report recommended about $1.2 trillion in revenues through reduced deductions and rates, with an approximate 3-to-1 ratio in spending cuts to revenue increases. The Rivlin-Domenici plan suggested a mix of 60 percent cuts to 40 percent revenues resulting in nearly $6 trillion of savings over nine years.

Democrats could use today’s hearing to prove that the difference in the parties’ approaches to raising revenue is more than just semantic. Republicans could use it to push harder for deeper entitlement cuts. The witnesses might represent how far the panel could get through compromise.

In a late September op-ed in the Washington Post, Bowles and Simpson called on the panel to come up with a plan that achieved savings above and beyond the minimum $1.2 trillion required by the Budget Control Act.

“We believe that going big could actually improve the chances of success, in terms of the politics and the economics of debt reduction,” they wrote. “We have called for at least $4 trillion in savings because it is the minimum amount of deficit reduction necessary to stabilize the U.S. debt and put it on a downward path as a percentage of gross domestic product.”

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