WASHINGTON (Reuters) — Democrats are proposing to slash huge U.S. budget deficits by up to $3 trillion, aiming high to repair the country's fiscal mess even as Republicans show early signs of resisting the proposals.
The broad package of measures calls for long-term spending cuts, including to the government-run Medicare health program for the elderly that threatens to explode the U.S. national debt. The other half of the package would come from tax increases, four congressional aides told Reuters on Wednesday.
The Democratic plan was presented on Tuesday behind closed doors to the special congressional panel tasked with finding ways of cutting the budget deficit by at least $1.2 trillion, the sources said.
It was a rare leak from the so-called "super committee," whose secretive deliberations have sparked intense speculation about how much progress the 12 Republican and Democratic members have made since they first began meeting on September 8. They face a November 23 deadline to report to Congress.
The aides spoke on condition of anonymity because of the sensitivity of the negotiations.
The Democratic plan proposes cutting the deficit by $2.5 trillion to $3 trillion and calls for between $200 billion and $300 billion in new stimulus spending to boost an ailing U.S. economy. It would be paid for with lower interest payments from reducing deficits.
It also seeks around $400 billion in Medicare savings, with half coming in benefit cuts and the other half in cuts to healthcare providers. Details of that proposal were scant but tackling the popular Medicare program is always politically risky for politicians in Washington.
Many Democrats oppose cuts to Medicare, while Republicans have consistently fought tooth-and-nail against any tax hikes. The congressional aides were not immediately able to say how the Democrat plan would achieve the revenue increases.
The aides did not say why Democrats were proposing such a big deal, but Democratic congressional leaders have repeatedly called on the super committee to go beyond its mandate to fix the country's fiscal mess.
Republicans refused to comment publicly on their political opponents' plan. But one congressional aide told Reuters that Senator Jon Kyl, a super committee Republican, interrupted the Democrats' presentation on Tuesday to complain that it contained "too much revenues."
"We haven't signed off on any revenues, and we certainly aren't doing anything that high," the aide quoted Kyl as saying.
There is a deep ideological divide between the two parties over taxes, which is likely to be a key issue in the 2012 elections. A Republican member of the super committee, Representative Dave Camp, on Wednesday proposed slashing the top tax rates for individuals and corporations.
Camp, chairman of the tax-writing House of Representatives' Ways and Means Committee, also called for a "territorial system" that would exempt 95 percent of offshore corporations' profits from the U.S. corporate income tax.
With U.S. budget deficits topping $1 trillion annually, ratings agencies are watching closely to see how the super committee advances toward a credible long-term solution to restore the U.S. fiscal health.
If the committee fails to reach a deal, automatic spending cuts, evenly divided between military and domestic programs, would be triggered, starting in 2013, under a budget deal struck between Republicans and Democrats this summer.
The Democratic plan proposes deeper cuts to Medicare than those envisaged by the summer budget deal. The automatic spending triggers would limit cuts to Medicare to 2 percent a year. Analysts say that would amount to about $123 billion in spending cuts for the program through 2021.