The Deficit Deal That Wasn’t: Hopes Are Dashed

WASHINGTON — The one sliver of real hope came a week ago, in the darkened Capitol on the Sunday night after Veterans Day.

Called away from dinner tables, the Jets-Patriots game on television and, in one case, a soccer team party, several Democratic members of thespecial Congressional committee on deficit reduction raced to the office of Senator Patty Murray for a hasty 8:30 meeting to discuss the outlines of a potential agreement. Crucially, it appeared to have the backing of at least one Republican on the 12-member panel even though it included a tax increase.

As the members spoke, they began to see the outlines of a deal, tentatively agreeing on tax rates, revenues, spending cuts and changes to Social Security and Medicare, according to interviews with members of the committee and their aides.

Whether the committee could reach the finish line was very much in question, but at least it was in sight, for the first time in the nine weeks the group had been meeting.

It disappeared almost as quickly.

On Sunday, just one week after both sides had begun to feel hope, several members of the bipartisan panel conceded that their weeks of negotiations had failed. In the end the two sides could not agree on a mix of tax increases and spending cuts and — perhaps above all — on the fate of the tax cuts originally signed by President George W. Bush, which are now scheduled to expire at the end of 2012.

While the panel’s failure was in many ways foretold — President Obama and the House speaker, John A. Boehner, failed to reach a similar deal only this past summer — the deadlock offers fresh evidence for everyone frustrated with Congress, including its own members.

“It was a huge opportunity missed,” Representative Chris Van Hollen of Maryland, a Democratic member of the committee, said in an interview on Sunday. Representative Jeb Hensarling, Republican of Texas, who headed the committee with Mrs. Murray, of Washington, agreed. “As a nation,” he said, “I am not sure how long we have to put America on a sustainable path.”

Democrats and Republicans, as has been their wont throughout the process, could not even agree on what led the talks to slide into failure.

Democrats insist that they were closing in on the framework of an agreement, but that Republicans backed away from their willingness to accept significant revenue increases in exchange for cuts in the growth of entitlement programs. They said Mr. Boehner sealed the fate of the panel on Thursday by offering a package that had a mere $3 billion in new revenue, far less than an earlier Republican plan.

Republicans, who agreed that there was a potential framework a week ago, counter that the deal was spoiled by Democrats, who refused to lock in the level of entitlement savings or tax changes they would accept, and began to demand more revenues to match any substantive entitlement changes. Democrats also would not agree to a framework for tax reform, Republicans said.

“There were good talks on Sunday,” an aide to a Republican panel member said, referring to the Veterans Day weekend meeting. “We felt that by Monday Democrats collectively had moved the goal posts.”

Further, Republicans argue, Democrats were never really committed to a plan, as evidenced by Senator Charles E. Schumer of New York, who predicted two weeks ago that the panel would fail to reach an agreement.

The members of the committee began the process with equal parts skepticism and hope. Many lawmakers had tried and failed to reach bipartisan agreements on the same issues over the last few years. They hoped that this time, with the threat of large cuts looming in the event of their failure, would be different.

Members of the panel, the Joint Select Committee on Deficit Reduction, spent most of September and early October getting to know one another, and putting together staff. Meetings were largely friendly, with one member bringing beef jerky, another salads from a fancy take-out place near Capitol Hill. On Senator Murray’s birthday, there were frosted cupcakes.

Republicans met or spoke by phone twice a day from almost Day 1. Democrats were not as tightly organized.

Serious negotiations did not begin until Oct. 25, when Democrats offered a proposal to reduce deficits by $3 trillion over 10 years through a combination of spending cuts and $1.3 trillion of revenue, largely from tax increases.

The Democratic proposal included as much as $500 billion of savings in health care programs, higher Medicare premiums for high-income beneficiaries and use of a less generous measure of inflation that would reduce annual cost-of-living adjustments in Social Security benefits.

A day later Republicans on the committee rejected the Democratic offer and came back with a proposal that would reduce deficits by $2.2 trillion and that included $640 billion of nontax revenue that Democrats said was too modest. Things were not looking good.

The committee held its last public hearing on Nov. 1. Among the witnesses was Erskine B. Bowles, the co-chairman of Mr. Obama’s fiscal commission, who presciently told the Congressional panel, “I am worried you’re going to fail — fail the country.”

Many side conversations were held between members of every possible combination of party and chamber. But when it came down to specifics, especially on taxes, they sputtered.

Democrats felt particularly aggrieved by Senator Jon Kyl of Arizona, the second-ranking Senate Republican, citing him as the main obstacle to an agreement. Democrats spoke of Mr. Kyl as if he were an angry father arriving home to realize the children were having a party, and shutting the whole thing down. “While Kyl is in the group, it sure seems that nothing will happen,” said a Democrat close to the negotiations.

Republicans were offended by what they felt were numerous partisan public comments by two Democrats on the committee, Representative Xavier Becerra of California and Representative James E. Clyburn of South Carolina, who, they said, were rarely in the room when serious negotiations were occurring.

A potential breakthrough occurred in a meeting in the Capitol late on the night of Nov. 7, when Republicans, led by Mr. Toomey, offered a $1.2 trillion package that included $300 billion of new tax revenue, It was the first time Republicans had shown themselves open to significant amounts of new taxes.

But as Democrats studied the proposal, they found much to criticize. The proposal would have permanently reduced tax rates for all taxpayers, and Democrats objected, in particular, to lowering the rates paid by the most affluent Americans.

This is when the patient seemed to take a turn for the worse.

In the eyes of Republicans, when Democrats rejected the Toomey plan, saying it would provide a windfall for millionaires and billionaires, little more could be accomplished.

Both sides used remarkably similar language to describe their frustrations. A Democrat involved in the negotiations said: “We made a reasonable offer and got nothing in return. We got naked in the room. Republicans are standing there in overcoats, hats and gloves and are toasty warm.”

A Republican aide, who believed Mr. Toomey made a good-faith proposal and got nothing from Democrats in return, said a few days later: “We showed some leg. The Democrats want us to get completely naked.”

On Veterans Day Mr. Obama spoke separately to Mr. Hensarling and Mrs. Murray by phone from Air Force One, as he began an eight-day tour of the Pacific Rim. The president was looking for an update, and to express his hopes they could reach a deal. Call when you have one, he effectively said to both, according to White House aides.

Others began feeling panicked. Defense Secretary Leon E. Panetta, a former chairman of the House Budget Committee, had kept a close watch on the panel, made near-daily phone calls to its members and intensified his public statements about dire consequences should the committee fail, causing automatic spending cuts.

By last Thursday Mr. Panetta had made a secret trip to Capitol Hill before heading up to Groton, Conn., for a visit to a submarine plant, and aides said he was in a bad mood on the trip north. In Groton his frustrations with the debt reduction panel seemed to boil over. “I urge this committee: suck it up,” Mr. Panetta told employees at Electric Boat. “Do what’s right for the country. That’s why we elect people: to govern, not to just survive in office.”

Over on K Street, the mood was equally glum. Lobbyists, it seemed, had more interaction with members of the committee than did many members of Congress. On Thursday, one lobbyist sent an alert to companies waiting for any bit of news. “The parties,” it said, “have stopped talking, and progress is no longer being made.”

The process that has dominated the 112th Congress was well on its way to repeating itself. Mr. Boehner took the Republicans’ final offer, for $643 billion of deficit reduction — about half of the statutory goal of the committee with less new tax revenue than Mr. Toomey’s plan — to Senator Harry Reid, the majority leader, on Thursday. Mr. Reid rejected it out of hand. The end was near.

By Friday, members were telling their staff members that little could be done to salvage the committee’s work, and began to move quickly to blaming one another along partisan lines.

Still, said some members, their work would not be for naught.

“Of those that I worked with, I have greater respect for them than before this process started,” Mr. Hensarling said. “Although we butted heads and we are all bitterly disappointed, these were good folks who were working hard. Prior to this thing I could not pick Patty Murray in a lineup, but she was very professional and acted with honor and integrity.”

Maybe others, members said, would pick up where they left off.