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Deficit Panel Faces Critical Week

With only 10 days left to craft a deficit reduction deal, the super committee is facing its now-or-never moment.

Last week, Democrats and Republicans on the Joint Committee on Deficit Reduction appeared to agree on only one thing: They were at an impasse. But after a week of exchanging plans and barbs, the committee’s best hope this week is that they’ve cleared enough space and paperwork to find a deal.

No one close to the committee has suggested that the fundamental disagreement between Democrats and Republicans — how to balance increased revenues, spending cuts and entitlement reform — is anywhere close to being resolved. But individual Members planned to continue exchanging ideas and plans through the weekend in an effort to break the deadlock.

Dueling plans from both parties last week seemed to bring out the most partisan statements yet from Members inside the room. Democrats attacked a $1.2 trillion Republican plan floated by Sen. Pat Toomey (R-Pa.) for not being a “serious” effort on revenues, even though it contained $500 billion in revenues, including $250 billion in tax code reform. Republicans pushed back that Democrats were not conceding enough on entitlements, even though their plan included $350 billion and $50 billion in Medicare and Medicaid reforms, respectively.

At the end of the week, it was almost impossible for even panel members to say where they stood.

“I’m not sure,” Sen. Rob Portman (R-Ohio) told reporters Thursday when asked to characterize where the talks were. “As you get closer to the end, it’s harder to be optimistic, but I’m remaining hopeful.”

Though the GOP proposal unveiled last Monday was summarily panned by Democrats — including Co-Chairman Patty Murray (Wash.) — the plan did mark a shift for a party once completely unwilling to touch the issue of tax increases. But Democrats believe the GOP’s call for making permanent the Bush-era tax cuts is an overreach because Republicans offered only $250 billion from tax deduction reform in return. Moreover, it is not clear that the Republican framework, which also suggests lowering the top tax rate from 35 percent to 28 percent, would be able to provide the amount of deficit savings indicated while achieving those rates.

But because the proposal came from a former Club for Growth president and was warmly received at a Senate GOP Conference meeting Wednesday, the move could be key to striking a deal. Short of that, Republicans believe they effectively punctured the Democratic message — floated last Monday by Senate Democratic Conference Vice Chairman Charles Schumer (N.Y.) — that the super committee would fail because the GOP would not discuss revenues.

“That’s one way of raising revenues … without increasing taxes,” Senate Finance ranking member Orrin Hatch (R-Utah) said Thursday, before conceding that “some people would say that’s raising taxes by cutting out what they consider to be loopholes.”

Hatch added, however, that he is still looking over the Toomey offer, and he expressed reservations about tinkering too much with the tax expenditure system.

The full super committee has not met to negotiate since Oct. 31, though small groups have continued to meet throughout the tumultuous two-week stretch.

On CNN on Sunday, Co-Chairman Jeb Hensarling said Republicans have challenged Democrats to produce a counteroffer on entitlements and believe their own tax plan will both broaden the tax base and help increase economic growth without raising taxes. The Texas Republican said he is open to a two-step process of instructing committees to come up with the entitlement and tax fixes.

“There could be a two-step process that would hopefully give us pro-growth tax reform. … So we Republicans, we want more revenues, we just want to raise it by growing the economy,” Hensarling said.

Super committee member Rep. James Clyburn on “Fox News Sunday,” however, questioned whether that economic growth would come from what Republicans put on the table, saying it can’t be verified through cost estimates from the Congressional Budget Office.

“About two-thirds of what Pat Toomey has put on the table I am for, I’ll tell you,” the South Carolina Democrat said. “And that may shock you. What I’m not for is trying to count something that CBO will not score.”

Eventually, all the panel members will have to get back in the same room if they are to come up with a plan to dispatch to the full Congress by Nov. 23.

At this point, aides to Members inside and outside the room suggest two courses of action: a larger plan that addresses entitlements and revenues significantly, or a modest plan that barely touches either.

The panel, by law, can produce a plan of any amount, but it has to generate a framework worth at least $1.2 trillion to avoid a politically poisonous sequester that includes about $500 billion in defense cuts, as well as deep cuts to domestic programs.

A smaller package could contain about $350 billion in non-tax revenues, like those included in a “down payment” toward the Democrats’ desired $1.3 trillion revenue plan. A larger plan likely would have some of the Toomey structure for tax code reform, but Democrats would likely fight over the Bush-era tax cut provisions.

Lawmakers will have to choose a road soon, though.

“I’m not giving up hope, and I hope my Democratic colleagues aren’t giving up hope until midnight on [Nov. 23],” Hensarling said Thursday.

President Barack Obama called the co-chairmen of the super committee Friday and warned them he would block efforts to partially defuse automatic spending cuts if they fail to cut a deal on deficit reduction, according to a White House statement.

In separate phone calls to Murray and Hensarling, Obama “made clear that he will not accept any measure that attempts to turn off part of the sequester,” the statement said. Some lawmakers, including Sen. John McCain (R-Ariz.), have said they would try to overturn automatic spending cuts for the Defense Department if the panel fails to reach a deal.

Steven T. Dennis contributed to this report.

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