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Flaws alleged in debt deal

5 who ran budget office doubt automatic cuts will work

By Heidi Przybyla
Bloomberg / August 9, 2011

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WASHINGTON - Congress could undermine the deal that raised the debt ceiling by failing to agree on a plan to curb the deficit and then softening the impact of automatic spending cuts that would kick in to achieve the budget targets.

That’s the view of five former directors of the Congressional Budget Office. Lawmakers on a new committee charged with deciding on a budget plan will struggle to reach an accord, even as Standard & Poor’s decision to downgrade US debt heightens pressure on the panel, some of the former budget office chiefs say. And while the backup mechanism for across-the-board cuts may be the best compromise for a divided Congress, it’s a flawed device with a history of failure, they say.

As part of the debt-ceiling law President Obama signed last Tuesday, the trigger will be activated if the panel of 12 lawmakers can’t agree on at least $1.2 trillion in savings by Nov. 23 or if Congress rejects a plan they propose. All five former Congressional Budget Office chiefs said there are ways for Congress to circumvent the trigger, which wouldn’t go into effect until 2013.

“Even if it fires, the question is, how many of the bullets actually hit your body,’’ said Peter Orszag, a onetime director of the nonpartisan office, which reviews congressional legislation and budgets.

Orszag, who also headed Obama’s budget office, was skeptical the committee will strike a grand compromise to curb entitlement spending and rewrite the tax code even after S&P said on Friday it was lowering the nation’s AAA credit rating.

Robert Reischauer, a Democrat who was in charge of the budget office from 1989 to 1995, said after S&P’s announcement that the downgrade will “put a great deal of pressure’’ on the new joint committee to report out a significant package.

Donald Marron, who was acting budget office chief in 2006, agreed, while Rudy Penner, who directed the office from 1983 to 1987, said he’s “very dubious’’ about the trigger.

And Marron said, “it’s not obvious to me that we have compromise bursting out all over the next six months.’’

Alice Rivlin, a Democrat who was the office’s founding director in 1975, said she’s holding out hope the six Democratic and six Republican lawmakers on the committee will reach a deal to head off the automatic cuts. None of the lawmakers, who will come from the House and Senate, have been named.

The trigger mechanism, which would split spending reductions equally between defense and domestic programs, is the product of months of unsuccessful negotiations among congressional Republicans, Democrats, and the White House to strike a broader deal to rein in entitlement programs such as Medicare and to overhaul the tax code.

While the cuts are supposed to be automatic, Congress can delay or override them if they prove too painful - defense spending would be reduced by 9.1 percent over a decade while nondefense programs would be cut 7.9 percent.