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Deficit panel holds public session on budget cuts

If lawmakers choose the discretionary route in achieving $1.2 trillion in savings over 10 years, they will need to lower the caps for appropriations as well, budget chief says.

Just a day after a heated closed-door meeting that indicated there's still a large gap between Democrats and Republicans on entitlement and tax reform, the Joint Select Committee on Deficit Reduction convened for its third public policy hearing on Wednesday morning.

And if the points members made during the two-hour hearing are any indication, the 12-member panel has a long way to go to reach a deal before its Nov. 23 deadline to present a package worth $1.2 trillion in deficit savings over 10 years to Congress.

The hearing was scheduled to be a discussion of discretionary spending, which makes up about 40 percent of the budget. But the members only loosely stuck to those guidelines, instead making partisan points about income distribution, defense spending and savings, tax reform, and economic uncertainty.

Congressional Budget Office Director Douglas Elmendorf, who testified during the group's first public policy hearing on the drivers of the debt, carefully explained budgetary concepts, warned the committee that its decisions on discretionary spending could be voided by future Congresses, and highlighted the savings already wrung from discretionary outlays. He also noted that mandatory spending "dominates" the federal budget.

The committee's Democrats and Republicans alike agreed with him - at least in theory. But while Democrats pointed out that mandatory spending reforms would have to be paired with reduced defense spending and additional revenues, Republicans maintained that spending - not revenues - is the problem.

"Lawmakers have already taken significant steps to constrain discretionary spending," Elmendorf said, noting that total discretionary funding in 2011 was lower than it had been since 2002 because of cuts already made to the discretionary budget.

Elmendorf pointed out that about half of discretionary spending goes to defense, with the other half split among a number of government priorities, including education, social services, health-related research, international affairs and policing. He noted that discretionary spending has risen from its share of the economy in 1999, when it constituted 6.2 percent of GDP, primarily because of increased defense spending over the last decade and the stimulus program of 2009. It now makes up about 9 percent of GDP.

The discretionary caps enacted in the Budget Control Act will already reduce budget deficits by $778 billion (not including interest savings) between 2012 and 2021, according to CBO calculations.

Still, Elmendorf noted, if lawmakers do choose to go down the discretionary route in achieving $1.2 trillion in deficit savings over 10 years, they will need to lower the caps for appropriations as well.

"Without a reduction in the caps," Elmendorf said, "funding for other discretionary activities would probably fill the gap created by the specific reduction or savings."

But if the opening statement by co-chair Sen. Patty Murray, D-Wash., was any indication, Democrats on the committee are not keen on making further cuts to the discretionary budget.

"Non-defense discretionary spending represents less than one-fifth of total federal spending," Murray said. "But listening to the debates here in D.C. over the last few months, you would think this small piece of the pie was a whole lot bigger."

Aides confirmed to National Journal that panel members Senate Minority Whip Jon Kyl, R-Ariz., and Sen. Rob Portman, R-Ohio, clashed with Democratic members over the outline of a Democratic deficit reduction plan presented during Tuesday's private meeting. Staff was asked to leave the room following the exchange. Reuters reported on Wednesday that Democrats proposed $2.5 trillion to $3 trillion in measures to reduce the budget deficit, including revenue increases and significant cuts to Medicare.

Kyl and committee staff have said pointed exchanges are not unusual in private committee meetings. The panel is stalled, with members unable to resolve the problem posed by GOP insistence that any plan not include new taxes, aides have said. Democrats will not discuss significant entitlement cuts without GOP concessions on taxes.

In an appearance on MSNBC's Morning Jo Wednesday ahead of the meeting, committee member Sen. Pat Toomey, R-Pa., said he was "cautiously optimistic that we'll reach an agreement."

But he said the committee is "not quite there yet."

As has become the norm during the committee's public hearings, protesters interrupted the proceedings at points. One man who appeared to be aligned with Code Pink complained loudly that he had not received a written copy of Elmendorf's testimony. At one point a woman wearing a shirt that read "GREED KILLS" walked up behind Elmendorf to shout that the committee was not listening to the public.

Murray requested the Capitol Police to restore order, prompting two guards to remove the woman as she called out, appropriating the language of the Occupy Wall Street movement: "I speak for the 99 percent: End the wars and tax the rich!"

Hensarling and Murray on Tuesday announced a Nov. 1 public hearing focusing on an "overview of previous debt proposals." Authors of prominent debt reduction plans are slated to appear. Former Sen. Alan Simpson, R-Wyo., and former White House Chief of Staff Erskine Bowles are scheduled to testify on the proposal they drafted with the president's fiscal commission last year. Former Office of Management and Budget Director Alice Rivlin and former Sen. Pete Domenici, R-N.M., will testify on their plan.

The committee must present its plan to Congress by Nov. 23, though Elmendorf has said that the group will need to submit a proposal to CBO early next month to have it scored in time.