(Bloomberg News) A group of U.S. senators is quietly attempting to do something almost unthinkable in Washington: craft a bipartisan solution to the nation's growing deficit in an election year.
The group -- which includes Lamar Alexander, a Tennessee Republican, and Michael Bennet, a Colorado Democrat -- hasn't been given a name like the "Gang of Six," and members might fail like others before them. That hasn't stopped them from joining forces when most lawmakers are focused on campaigning.
They are looking at reviving a proposal by the leaders of President Barack Obama's failed 2010 deficit-cutting commission to require Congress to act on a long-term plan, said Democratic Senator Kent Conrad of North Dakota. The lawmakers want to offer a proposal during the lame-duck session of Congress after the Nov. 6 election.
"The thing that has the greatest potential to succeed is, in the lame duck, a framework agreement is reached on a grand bargain to reduce deficits and debt by at least $4 trillion over 10 years," said Conrad, the Senate Budget Committee chairman and a member of the new group of eight senators.
The U.S. faces a so-called fiscal cliff in January, when $1.2 trillion in automatic spending cuts over 10 years will start and the George W. Bush-era tax cuts will expire, unless Congress breaks its deadlock on a plan to replace it. Democrats propose letting tax cuts expire for top earners, while Republicans want spending reductions instead of more tax revenue.
Under one alternative being considered by the group of senators, Congress would be given six months to overhaul U.S. tax law and entitlement programs such as Social Security. If lawmakers can't agree, the deficit panel leaders' plan would be triggered, Conrad confirmed in an interview yesterday.
"We have automatic consequences that go into effect" in place of the automatic spending cuts, Conrad said. "We've spent an enormous amount of time on other consequences for failure," he said.
"I'm all for that, I wanted Bowles-Simpson," said Senator Tom Coburn, an Oklahoma Republican participating in the Senate group's talks. As a member of the president's debt commission, Coburn voted in December 2010 for the proposal by Republican former Senator Alan Simpson of Wyoming and former President Bill Clinton's White House chief of staff, Erskine Bowles.
Still, Coburn cited the Simpson-Bowles plan's lack of a full overhaul of Medicare as a potential concern.
The approach of relying on Simpson-Bowles is a logical alternative to the crush of tax increases and spending cuts that could cripple the U.S. economy, said Bob Bixby, head of the Concord Coalition, a nonprofit group that advocates for a balanced budget.
"It makes for a more rational cliff," he said. "Letting the cliff go into effect is simply not good policy."
The Simpson-Bowles plan would cut individual and corporate tax rates, curtail hundreds of tax deductions and credits, reduce Social Security benefits and Medicare, raise the gas tax and cut federal discretionary spending.
It didn't win enough support among the debt commission members to be sent to Congress for a vote. Among the commission members who opposed the proposal was Representative Paul Ryan of Wisconsin, now the Republican vice presidential nominee.
There's no guarantee that the Senate group's idea would avoid the same fate as similar attempts by lawmakers and the White House over the past two years to strike a multitrillion- dollar budget-cutting bargain.
'Change of Perspective'
"I don't dismiss the idea out of hand," said Bill Galston, a former domestic policy adviser in the Clinton administration. "There will have to be a change of perspective on both sides. If both sides come to the conclusion that it's gridlock or a deal, then we'll have a deal."
"If one side continues to hold out hope that it can continue to do things its own way, then we won't have a deal," Galston said.
Laura Tyson, a former economic adviser to Clinton and now an economics professor at the University of California at Berkeley, said at a Bloomberg Government luncheon yesterday that she is "optimistic" the atmosphere will be better for an agreement following the election.
"The tone may change," particularly if Republicans lose seats in the House, she said.
Most of the major bipartisan debt-reduction plans offered over the past couple of years included different blends of the tax and spending changes in Simpson-Bowles, said Bob Stevenson, a Republican former Senate Budget Committee aide.
"There are only so many ways to bake a pie," Stevenson said. While hurdles to gaining approval would be significant in the Democratic-controlled Senate and potentially insurmountable in the Republican-controlled House, "it's not impossible," he said.
Coburn said the nation's debt problem is "severe enough" that inaction isn't an option. Still, nothing will happen until late this year, he said.
"The real sickness of Washington is nobody wants to fix this until after the election so they can see the landscape," Coburn said.
The Simpson-Bowles plan would achieve 26 percent of its deficit reduction from revenue increases, 57 percent from spending cuts and 17 percent from interest savings.
In March 2011, a bipartisan group of 64 senators organized by Bennet and Michael Johanns, a Nebraska Republican, sent a letter to Obama urging action on a plan based on the fiscal commission's work.
Last week, one of the Republican Party's most ardent tax- cut advocates said if Obama is re-elected, there's not much point in delaying a compromise on taxes.
"You can't get a deal with Obama without raising taxes on the producing class of folks," said South Carolina Senator Jim DeMint, a leader of the limited-spending Tea Party movement. "We might as well cut a deal," he said. "If Republicans want to maintain the defense, we're going to have to give tax increases to Obama."
There is no similar attempt to craft a bipartisan plan in the Republican-controlled House. On Sept. 11, Speaker John Boehner of Ohio said he was "not confident at all" that Congress can avoid the automatic spending cuts. Many lawmakers are skeptical that Congress can accomplish much this year beyond buying time to work out their differences.
In March, the House defeated a version of the Simpson- Bowles proposal on a 382-38 vote, demonstrating the difficulty the plan faces with Republicans and also Democrats, who oppose the cuts to entitlement programs.
"The most likely scenario of a lame-duck Congress is to do a Band-Aid solution," said South Carolina Senator Lindsey Graham. He is working on a measure to avert $54.7 billion in defense spending cuts in fiscal 2013 with Senators John McCain, an Arizona Republican, and Carl Levin, a Michigan Democrat.
Pressure for an agreement has become so intense that most investors assume Congress and the president will deliver a plan after the election, said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia.
Moody's Investors Service said in a Sept. 11 report that it will downgrade the U.S. next year if Congress doesn't come up with a way to stabilize the growing debt. Should the U.S. go over the fiscal cliff, the New York-based rating firm said it would wait to see if "the economy could rebound from the shock" before giving the nation a stable outlook.