White House, senior Dems reach a deal on debt, pay-go and fiscal commission

Senior Democrats in Congress and the White House reached a deal Tuesday evening to create a fiscal commission and a pay-as-you-go budget enforcement bill.

Under the agreement, President Barack Obama would enact a commission via executive order to come up with a package of fiscal reform proposals, a senior congressional Democratic aide said. Congressional leaders have agreed to allow the package to come up for votes in their respective chambers, the aide said. Also under the deal, the Senate would pass a pay-go bill similar to one passed in the House.

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The deal came out of discussions led by Vice President Joe Biden and senior Democrats that have been ongoing since last week. House Democrats involved in the discussions include Speaker Nancy Pelosi (Calif.), Majority Leader Steny Hoyer (Md.) and Budget Committee Chairman John Spratt (S.C.). Senators involved in the talks include Majority Leader Harry Reid (D-Nev.) and Senate Budget Committee Chairman Kent Conrad (D-N.D.).

The deal is tentative, as Pelosi and Conrad have yet to approve it, according to the aide. Reid's office had no comment on the agreement.

The deal would pave the way for Congress to pass an increase in the $12.4 trillion debt ceiling, which is necessary to allow the government to borrow money past mid-February. The Senate plans to begin debate on the debt ceiling increase Wednesday.

White House aides and centrist Democrats have said that reduction of the deficit, which hit a record $1.4 trillion in 2009, will be a priority this year.

Conrad and a group of centrist Senate Democrats have vowed not to back a debt ceiling increase unless a fiscal commission was created. Conrad and Sen. Judd Gregg (R-N.H.) had first proposed the commission idea, arguing that a bipartisan panel of lawmakers was necessary to deal with the mounting federal debt. Under their plan, the commission would have the ability to propose reforms to the big entitlement programs -- Medicare, Medicaid and Social Security -- the tax code and federal spending. Any reform proposals produced by the commission would be ensured floor votes in both the House and the Senate.

A commission created by the president would lack the statutory power of the Conrad-Gregg commission to force the House and Senate to vote on it. Gregg has opposed the idea of a commission created by Obama because its product could be ignored by Congress. Reid has said that he would allow a floor debate on an amendment creating the Conrad-Gregg commission during the Senate debt limit debate.

Pelosi and other House Democratic committee chairmen had been opponents of the commission, arguing that it would take power away from their committees. They said they would consider a commission only after the Senate passed a statutory pay-go bill, which seeks to require any new mandatory spending be offset with new tax revenue or spending cuts.

The aide said that the pay-go bill to be passed by the Senate under the deal reached Tuesday would apply to more programs than the House version. Conrad had criticized the House bill, passed last July, because it wouldn't require lawmakers to pay for 2001 and 2003 tax cuts passed during the Bush administration, an extension of 2009 estate tax rates, a fix keeping Medicare doctor payment rates at their current level and another fix preventing the alternative minimum tax from hitting middle-income Americans.