Deficit talks stall as Democrats balk at GOP proposal

The super committee appears to have hit an impasse as talks continued behind closed doors Wednesday after Democrats rejected the latest Republican offer and the committee struggles to meet its Thanksgiving deadline to strike a $1.5-trillion deficit-reduction deal.

The Republicans proposed raising some tax revenue by closing loopholes in exchange for permanently pushing down income tax rates for the wealthiest American households and others.

Republicans portrayed their offer as a significant development because they were willing to stray from their no-new-taxes stance and put revenue on the table. Most Republicans have signed an anti-tax pledge with activist Grover Norquist’s Americans for Tax Reform they are reluctant to break, and GOP leaders have resisted Democrats’ insistence that taxes make up a portion of any deficit-cutting package.

But Democrats said the GOP’s $1.2 trillion was unrealistic, as the cost of the new tax breaks would far exceed the $250 billion in estimated new revenue from capping or eliminating some itemized deductions.

The two sides appear to be at a standstill as both sides continued to meet, separately, behind closed doors Wednesday as talks continued.

Republican Sen. Rand Paul of Kentucky, who is not on the 12-member panel, told Sean Hannity during a radio broadcast that Democrats had walked away from the negotiations after rejecting the GOP offer. Democrats said that characterization was not true.

“I have news straight from sources close to the super committee that the Democrats have walked away from the table,” Paul said, offering what he called a “scoop” on the show.

“They’re refusing to talk to the Republicans about a deal and they will not counter any offers and basically there’s an impasse and it’s starting to look like they don’t want any deal at all.”

Congressional aides said Democrats did not “storm out” of the meeting, but made it clear that the Republican offer was not accepted and both sides should regroup.

Sen. John Kerry (D-Mass.), who attended the meeting late Tuesday, told the Republicans their offer of new revenue was insufficient.

Democrats have sought a $3-trillion package equally split between spending cuts and new revenue, which they characterize as a balanced approach. That proposal would raise more than $1 trillion in new tax revenue largely by targeting wealthier households.

Democrats said Republicans must come forward with a more substantial revenue proposal.

But Republican aides said it was up to Democrats to put the next offer on the table as negotiations continue.

“It’s hard to do that if the other side is not going to show up,” said one congressional aide.

As both sides continued to meet Wednesday, the “gang of 45” senators – Republicans and Democrats – who support a broad deficit-cutting deal were preparing to send a note to the super committee reminding the panel of their preference for a larger package.

“We’re hoping it will go past $1.2 trillion or $1.5 trillion to $4 trillion,” said Sen. Richard Durbin (D-Ill.), one of the original “gang of six” senators who tried unsuccessfully earlier this year to forge a deficit-cutting deal of that size.

“It sounds counterintuitive,” Durbin conceded, but “I think bigger is easier.”

Budget hawks have long pushed the committee to try to achieve a larger deficit-reduction package, saying it could be easier to find common ground among the partisan differences if all aspects of federal tax and spending were on the table.

The committee’s failure to reach its Nov. 23 deadline could upset the financial markets and lead to another downgrade of U.S. credit. It also would trigger mandatory spending cuts to defense and domestic accounts in 2013, that lawmakers from both parties are trying to avoid.