Partisan battle lines drawn on taxes as US budget talks begin

Credit: Reuters/Yuri Gripas

Rep. Paul Ryan (R-WI) questions Marilyn Tavenner, administrator of the Centers for Medicare & Medicaid Services, during a House Ways and Means Committee hearing on ''Affordable Care Act Implementation'' on Capitol Hill in Washington, October 29, 2013.

The 29-member congressional negotiating panel, commissioned under this month's deal to end a government shutdown and lift the federal debt limit, has until December 13 to agree on a plan that would at least reduce the effects of some $109 billion in spending cuts looming in 2014.

Republican and Democratic panel members have worked in recent days to lower expectations that the talks could result in a 'grand bargain' that would reduce federal budget deficits by more than $1 trillion over 10 years. Instead, they are focusing on a much smaller deal.

Democratic leaders of the conference committee said they want part of the budget savings to come from increased revenue raised by closing some tax breaks for corporations and wealthy Americans.

Republicans said the savings need to come from cuts to expensive federal benefits programs and they will not support tax increases.

'I want to say this from the get-go: If this conference becomes an argument about taxes, we're not going to get anywhere,' said Representative Paul Ryan, the House of Representatives Budget Committee chairman who is leading the Republicans on the panel.

Ryan said Republicans would prefer to use the savings from eliminating 'carve-outs and kickbacks' to lower tax rates, which they argue would boost economic growth and generate increased revenues. Republicans want savings from benefits programs such as the Social Security retirement program and the Medicare health insurance program for the elderly.

'Let's focus our energy on the task at hand: a budget that cuts spending in a smarter way,' said Ryan, his party's vice presidential nominee last year.

The panel's Democratic leader, Senate Budget Committee Chairwoman Patty Murray, said she is prepared to make some compromises on spending cuts, but only if Republicans are willing to do the same on taxes.

'While we scour programs to find responsible savings, Republicans are also going to have to work with us to scour the bloated tax code - and close some wasteful tax loopholes and special interest subsidies,' Murray said, adding that it was 'unfair - and unacceptable - to ask seniors and families to bear this burden alone.'

The budget panel has 22 senators and seven House members. Any deal would need a majority vote in each chamber. Democrats control the Senate. Republicans control the House.

There would be no immediate consequences if the panel fails to reach an agreement by December 13, but about a month later, on January 15, government spending authority would run out again, raising the threat of another government shutdown.

On the same day, a new round of automatic 'sequester' spending cuts would be due to start.

While many Republican conservatives have sought to keep the automatic spending cuts in place, the next round of cuts would hit the military harder next year with about $20 billion more in cuts compared to 2013. This may motivate some Republicans to push for alternative savings.

(Editing by Will Dunham)