Lawmakers ready budget fallback options amid tax impasse

With less than three weeks until their deadline, U.S. budget negotiators have yet to break an impasse over revenue, prompting lawmakers to draft plans to blunt $19 billion in defense cuts set to start in January.

One idea -- known as “smoothing” -- would redistribute the 2014 reductions across the 10-year timeframe of the automatic Pentagon cuts known as sequestration. Instead of the cuts hitting in January, defense spending next year would remain at or higher than the current $518 billion level, with greater reductions coming in future years.

Budget analysts call the smoothing approach a gimmick, and Tea Party-aligned lawmakers probably will oppose it.

“It’s the budget equivalent of rearranging the deck chairs on the Titanic,” said Stan Collender, managing director of Qorvis Communications LLC in Washington and a former congressional appropriations aide.

Still, if Democrats and Republicans on the 29-member budget panel can’t bridge the revenue divide, smoothing may serve as an alternative for both parties that want to stop cuts the Pentagon says will devastate important military functions.

Aides to Senator Patty Murray and Representative Paul Ryan, the top Democratic and Republican negotiators on the bipartisan budget panel, say they are inching closer to a tentative deal. They’re identifying savings outside major entitlement programs to replace a small portion of the $1.2 trillion in automatic spending cuts over a decade, with a Dec. 13 deadline for an agreement.

Political Pressure

Ryan, a Wisconsin Republican, has drawn up options both chambers have included in their respective budget resolutions, and political pressure is mounting for some deal.

They remain split over whether additional revenue by ending some tax breaks should be a part of an accord. House Speaker John Boehner, an Ohio Republican, has repeatedly ruled out any tax increases while Murray says revenue must be included.

Senate Democrats on Nov. 21 moved to end delaying tactics known as filibusters for most executive nominations, leading to an escalation in partisan battling. Republicans warned the vote will create an environment that could undermine the work of the budget panel and efforts to reach fiscal deals.

It “further complicated a federal budget debate that was already overly complicated and had little chance of success,” Collender said. The same day, Boehner said he is making contingency plans in case the budget talks fail, saying the House will vote on a temporary spending bill keeping the government open and the spending caps in place.

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