Wall Street wants the congressional deficit committee at least to lay out a path toward getting the U.S. fiscal balance sheet in order — even if the panel can't produce the solution itself in the next two weeks, a prominent bank executive said today.
“It is a true moment of leadership for the U.S.,” Vikram Pandit, chief executive of Citigroup Inc., told the annual meeting of the Securities Industry and Financial Markets Association in New York. “Show us that we can get to the point where we can deal with this effectively.”
The Joint Select Committee on Deficit Reduction must offer up some kind of plan by Nov. 23. As part of the debt-ceiling legislation approved in August, the 12-member body is required to come up with at least $1.2 trillion in federal budget savings over the next 10 years. That proposal would then be voted on by Congress by Dec. 23 under special rules that prevent amendments or a filibuster in the Senate.
If the supercommittee fails to come up with $1.2 trillion in cuts, then $1.5 trillion in reductions will automatically go into effect, beginning in 2013.
Sen. Michael Crapo, R-Idaho, is urging the panel to exceed its statutory mandate and achieve at least $4 trillion in spending cuts over 10 years. Mr. Crapo served on the presidential deficit commission last year that arrived at that number.
“A $4 trillion plan helps us tread water,” Mr. Crapo told the SIFMA audience. “But it does not get us out of the crisis.”
By playing on a larger field, the deficit committee will create political space to break the stalemate between conservatives who resist raising taxes and liberals who protect entitlement spending, Mr. Crapo argued.
“The way to beat gridlock is to deal with the entire issue and do it in a big way,” Mr. Crapo said.
He favors a plan that would achieve the $4 trillion in cuts while also raising revenues, reforming entitlement spending and providing an enforcement mechanism. The increased revenues would not come from higher tax rates but rather from closing loopholes and eliminating costly tax credits, deductions and deferrals.
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Most observers say that a big deficit deal will not pass in the House of Representatives, where the GOP majority wants to reduce the deficit strictly through spending cuts.
Mr. Crapo said the House could come around. He pointed to bipartisan letters from House and Senate lawmakers last week asking the supercommittee to exceed its deficit-reduction mandate – although the notes didn't go into specifics.
“It's not rocket science, but it is brutal politics,” Mr. Crapo said. “We need to build willpower in the country to get it done. If you put a bold plan together, you would see more willingness in the House.”
Mr. Crapo acknowledged, however, that there is a good chance the supercommittee will get only to $1.2 trillion in cuts or even fall short of that mark.
“My hope is that we can get a solution in place before the bond market does it for us,” Mr. Crapo said.
