Congress stalls out on budget and deficits. What next?

Talks broke down on key fronts this week as an impasse appeared on cutting spending and raising taxes. That leaves bipartisan leadership talks, chaired by Vice President Biden, as the main venue for a deal that could pass both the House and Senate.

Congress slipped into “stall” mode on all things budgetary this week as talks over how to rein in deficits broke down on key fronts.

Senate Democrats had expected to take up their own budget in committee next week, but instead deferred the markup indefinitely. Senate Budget chair Kent Conrad (D) of North Dakota said that he saw no point in going forward with a partisan budget.

At the same time, Sen. Tom Coburn (R) of Oklahoma, bowed out of the bipartisan Gang-of-Six talks, citing an impasse over entitlement cuts. The talks between the remaining five senators continued, but Coburn’s role is seen as critical to sell the plan to conservatives.

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“They just don’t have any desire to compromise,” says Stanley Collender, a budget expert and managing director of Qorvis Communications in Washington, commenting on Senate budget negotiations. “If anything, they’re further apart.”

That leaves bipartisan leadership talks, chaired by Vice President Biden, as the main venue for a deal that could pass both the House and Senate. On Thursday, Senator Conrad in effect deferred to those talks with a view to using the Budget Committee to shepherd a bipartisan leadership deal through the Senate.

“Democrats on the Budget Committee are very close to an agreement. We will have a budget,” said Senator Conrad, in a statement. “But after broad consultation, we have decided to defer a budget mark-up because of the high-level bipartisan leadership negotiations that are currently underway.”

Aides close to the budget negotiations say that the budget panel was closing in on a deal to cut $4 trillion in spending over 10 years to be achieved by 50 percent spending cuts and 50 percent revenue increases. But Republicans unanimously opposed tax increases, and there were divisions in Democratic ranks that blocked a final agreement.

Sen. Bernard Sanders (I) of Vermont, a member of the Budget panel, was holding out for a 5.4 percent surtax on incomes over 1 million a year, but two Democrats on the panel balked at raising taxes in an economic downturn. Senator Sanders says he will not vote for any budget plan without “shared sacrifice,” including tax increases. With the panel nearly evenly divided with 12 Democrats and 11 Republicans (Sen. Sanders aligns himself with the Democrats), his dissent is a critical block to any partisan plan.

“Conrad doesn’t see how having a partisan markup now in any way advances the ball,” said a Senate Democratic aide. “He is also fearful that a partisan markup would only harden positions.”

But Senate Republicans say that the majority is ducking a tough political problem to avoid a backlash from voters over unpopular spending cuts or tax increases. Twenty-three Democrats are up for reelection in 2012, compared with 11 Republicans in the Senate.

“It seems Senate Democrats are desperately trying to avoid having to present a budget to the American people,” said Sen. Jeff Sessions (R) of Alabama, the top Republican on the budget panel, in a statement.

“Senator Reid may wish to shield his members from tough votes that expose their unwillingness to cut spending or their eagerness to raise taxes. But that strategy will not hold. The public will be mobilized. Sooner or later every senator will have to stand and be counted,” he added.

That leaves the GOP House-passed budget, which cuts $5.8 trillion over 10 years, without raising taxes, as the only budget document currently on the table. The GOP plan, drafted by Rep. Paul Ryan (R) of Wisconsin, converts Medicare to a voucher-based system and passed without a single Democratic vote.

Senate majority leader Harry Reid (D) of Nevada says that the Senate will vote on the GOP House budget next week. On Friday, Senate Democrats released a report predicting a “devastating” fallout, state by state, should that budget be adopted for 2012 spending.

These include the loss of 2 million private sector jobs over the next five, due to proposed cuts to Medicaid, and the doubling of health costs for seniors, due to changes in Medicare.

“Nationwide, nearly 4 million seniors would pay $2.2 billion more for prescription drugs in 2012 alone under the Republican plan,” the report concludes.

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