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Deficit Deal Impasse Threatens Key Initiatives

As both parties prepare to blame each other for the super committee’s likely failure, House and Senate leaders face the stark reality that they now have to take swift action to rescue key programs they were expecting the panel to extend.

Unemployment benefits, tax extenders, the payroll tax holiday and the Medicare “doc fix” — which prevents doctors’ payments from being slashed — are all expiring measures that leaders hoped the super committee would be able to bundle into a final deal, fast-tracking them to long-term renewal. Short of a super committee agreement, which appeared out of reach after a weekend of little to no negotiations, leadership will have to move these pieces on their own, in addition to a spending bill to avert a government shutdown Dec. 16.

“We don’t have the answers,” Senate Majority Whip Dick Durbin (D-Ill.) said late last week when asked how Congress would deal with the expiring initiatives. “The super committee was put in place to avoid that so we would have at least a strategy to take us through the election, and if they don’t succeed, we have to address these issues. And the notion of imposing a new payroll tax on people after Jan. 1, in the midst of this recession, on working families, is totally counterproductive.”

Given the deep cynicism shrouding the super committee’s work for weeks, sources close to leadership said that the panel’s failure to reach a $1.2 trillion agreement by Wednesday was an outcome they accounted for in end-of-year plans. Although the House’s target adjournment date is Dec. 8, the Senate is booked through Christmas Eve, and both chambers likely will need more than just two workweeks to clear the legislative docket. Senate leadership aides indicated that there likely would be an early December stand-alone vote on extending the payroll tax cut, a piece of President Barack Obama’s jobs plan, but many of the other programs likely will need to be lumped together in some sort of end-of-the-year bill, whether through the continuing resolution or some other spending measure.

It’s not clear what that legislative vehicle might be. Congress had moved toward a minibus strategy of approving clusters of appropriations bills for various agencies in lieu of passing another short-term government-wide spending extension. The House and Senate cleared the first minibus, but the second — including financial services and State and foreign operations spending — was blocked last week on the Senate floor. Leaders had been holding off on a longer-term stopgap spending bill until work on the smaller appropriations bills concluded, but now all funding bills are losing support from Republicans loath to support more government spending.

Still, most sources expect that as the Christmas holiday creeps nearer, Congress will find a way to get at least some of these issues resolved.

“We’ve always known these things would have to get done before the end of the year, and we won’t have an issue doing our work,” a House GOP aide said Sunday.

But aides also were uncertain whether the House would entertain every item that Democrats and Republicans had expected would be included in the super committee deal. In a pen and pad with reporters last week, House Majority Leader Eric Cantor (R-Va.) did not want to delve into details of the panel’s discussions but noted that regardless of the outcome, he believed Congress would address the doc fix. But sources said an extension to unemployment insurance could prove to be difficult because of opposition from many conservatives. If it is considered, there could be a protracted battle over whether the additional benefits need to be offset by other cuts.

“If you want to extend unemployment benefits, they have to be paid for,” Sen. Rand Paul (R-Ky.) said on CNN’s “State of the Union” on Sunday. “We have an unemployment program. We have a tax for it. And it’s paid for, for 26 weeks. So the question is, do we want to borrow money from China to pay people not to work?”

Although the super committee’s obituary was all but inked over the weekend, many of the panel’s members took to the television airwaves to try to make their final cases for why their party was on the right side of the debate and expressed last-ditch, cautious optimism that the group could scrounge together some sort of agreement in its final hours.

Work over the weekend was almost negligible. Super committee members of both parties held conference calls Saturday, but only Sens. Jon Kyl (R-Ariz.), Rob Portman (R-Ohio) and John Kerry (D-Mass.) came into the Capitol.

Late last week, Speaker John Boehner (R-Ohio) offered an informal $643 billion fallback plan to Senate Majority Leader Harry Reid (D-Nev.). The idea was to find a smaller deal to minimize the pain of the $1.2 trillion in automatic, across-the-board cuts that would go into effect in January 2013 if the group comes to no agreement at all. Of the $643 billion, $316 billion would have been discretionary cuts, including $100 billion from defense. The package also included $98 billion in interest savings and $229 billion in revenues and fees. Of that revenue figure, only $3 billion would be from tax-related changes, with Republicans offering to eliminate the corporate jet tax — a favorite provision for Democrats to highlight as an example about unfair tax breaks to America’s wealthiest.

According to sources familiar with negotiations, Democrats would not accept the $643 billion package unless it also included about $150 billion to $200 billion in tax-based revenue, which was a non-starter for the GOP. The point of the more modest package, Republican aides said, was that neither party’s sacred cows, taxes for the GOP and entitlements for Democrats, would be significantly affected. There were a few other revenue ideas on the table, including a gas tax break, but Republicans said they could not move as far as Democrats wanted.

Co-Chairman Rep. Jeb Hensarling was especially downtrodden in reviewing the committee’s work and the effect its failure could have on the economy.

“I would hope there wouldn’t be again an adverse impact in the sense that the American people are still going to get the deficit reduction that was contemplated under the law. But it is a huge blown opportunity,” the Texas Republican said on “Fox News Sunday,” referring to the panel as if it were already dead. “It wasn’t so much of a failure as it was a failure to seize an opportunity. And if it’s not this opportunity, this nation better seize another one or we will be in economic trouble.”

The co-chairmen will have to announce a public hearing by Monday if they are to take even symbolic votes on a plan, or even competing proposals, by the panel’s Wednesday deadline. Monday also would be the last day the panel could receive a score from the Congressional Budget Office to enable those final votes.

If the committee fails, Congress still has more than a year to find an alternative to broad, automatic cuts.

“If the super committee can’t do it, then I hope that Congress will,” Co-Chairman Sen. Patty Murray (D-Wash.) said on CNN on Sunday. “We have to keep working on it, and I’m going to keep working on it.”

Correction: Nov. 20, 2011

An earlier version of this story misstated House Majority Leader Eric Cantor’s title.

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