Summary of breakout sessions during fiscal summit

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The fiscal responsibility summit President Barack Obama hosted at the White House on Monday included breakout discussions of key issues in five different areas. A summary of each of the 90-minute sessions:

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BUDGET REFORM

The discussion of reforming the budget process produced no consensus on how to help Congress grapple with politically dangerous issues such as Medicare and Social Security, the federal retirement programs whose rapid growth threatens to balloon the deficit in coming years.

Senate Budget Committee Chairman Kent Conrad, D-N.D., pressed for a special bipartisan commission that would recommend legislation for a mandatory up or down vote. He was backed by several lawmakers at the table, including Sen. Judd Gregg, R-N.H., and Sen. Evan Bayh, D-Ind.

"Clearly, we are on an unsustainable course," Conrad said. "To deal with it, you cannot just rely on the regular order."

But others, like House Appropriations Committee Chairman David Obey, D-Wis., and Rep. Chris Van Hollen, D-Md. — both top allies of House Speaker Nancy Pelosi, D-Calif. — disagreed. Many lawmakers with expertise in policies such as Medicare don't want to give up their power to a special commission.

"I just don't believe in passing-the-buck solutions," Obey said.

Obey said that huge budget problems can only be solved when there is bipartisan support from the leadership of both parties and a sense of trust between them to take the political heat for grappling with such politically challenging programs.

Bob Greenstein, executive director of the liberal Center on Budget and Policy Priorities, said that a special budget process can't force agreement where there isn't one to be found anyway.

In the end, some lawmakers seemed attracted to a potential compromise in which lawmakers would set a deadline for themselves to act and if they couldn't meet it, a fast-track process could kick in.

The administration wants to deal with health care reform first, but panel members like Rep. Paul Ryan, R-Wis., said it would be better to attack the long-term imbalances in Social Security, which is less complicated. That approach could build up a sense of trust between the two parties.

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TAX REFORM

Two themes emerged from the tax reform discussion, led by Treasury Secretary Timothy Geithner and Christina Romer, chairman of the president's Council of Economic Advisers: The tax code needs to be made simpler and fairer, and rising health care costs must be brought under control.

Lawmakers in the room also agreed on the need for a permanent fix for the alternative minimum tax, which was designed to make sure the wealthy don't avoid paying taxes. But it was never indexed to inflation and would ensnare families making as little as $45,000 annually without the yearly patching Congress does.

Sen. Thomas Carper, D-Del., urged closing the tax gap — the difference between what taxpayers owe and what they pay — recently estimated at more than $300 billion. He said the government needs to do a better job getting its money back when it overpays someone, of controlling cost overruns and of getting rid of surplus property it doesn't need but is costly to maintain.

Sen. Olympia Snow, R-Maine, argued for two-year budgets, calling it long overdue. "Clearly it would be a great good-government move," she said. Snow said two-year budget would give lawmakers breathing room and time to carry out their oversight function of federal departments, agencies and programs.

She also argued for using the next two years to "re-examine the entirety of our tax code." She said 10,000 pages of changes had been enacted since 1986.

Rep. Nydia Velazquez, D-N.Y., chairwoman of the House Small Business Committee, argued for a seat at the table for small businesses. The tax system, she said, is expensive to comply with, diverting money that could be used to grow business operations.

Sen. Jon Kyl, R-Ariz., expressed concern about raising taxes to tackle the growing deficit, saying such a step proved unworkable in Japan.

"The idea of raising tax rates ... could have a very negative effect on economic growth, i.e., on the recovery from the recession," Kyl said.

He urged the administration to think about the context of tax policy. "In the current situation, we aren't out of the wood yet."

Advocates in the room urged the administration to consider new revenue sources and to give the IRS a long-term stable budget so it can do its job. Other suggested the time has come for a consumption or value-added tax.

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PROCUREMENT

A group discussing ways to improve federal contracting called for increasing the number of businesses competing for government work, applying stricter standards before contracts are awarded and expanding the use of temporary federal workers for services now handled by more expensive contractors.

Sen. Carl Levin, chairman of the Senate Armed Services Committee, said the administration can save money by adopting a "fly-before-you-buy" policy requiring defense contractors and other vendors to prove equipment works before being sold to the government.

Levin said he and Arizona Sen. John McCain, the top Republican on the committee, are introducing legislation designed to change defense contracting. Their proposal would create an independent cost director to review project expenses before contracts are approved. It also would trigger contract cancellations when costs exceed by at least 25 percent the original project expense, unless the vendor can prove why the additional money is justified, he said.

McCain said Obama must increase the number of fixed-price federal contracts that would eliminate expensive add-ons after a vendor is chosen. Sen. Joe Lieberman, I-Conn., chairman of the Senate Homeland Security and Governmental Affairs Committee, pointed out that defense contracts in recent years grew by more than $300 billion above their initial contract prices.

"There's a line here that's costing us a whole lot of money," Lieberman said.

Some in the group recommended hiring more federal workers, even if only on a temporary basis, to replace private contractors, including costly security outfits hired to protect vendors in Iraq and Afghanistan.

"I still don't think it's too late to do that now," said California Rep. Darrell Issa, ranking Republican on the House Oversight and Government Reform Committee.

Homeland Security Secretary Janet Napolitano asked the panel, made up of lawmakers and interest group leaders, whether federal contracting should come with strings attached, requiring businesses, for example, to provide employees health care if the company receives government work.

Most opposed such a mandate, arguing it would keep some small businesses from seeking federal contracts and increase the cost of some projects. "There are a lot of practical problems with it," Levin said.

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HEALTH CARE

At a session on health care, attendees grappled with how to achieve the administration's twin goals: "The idea of maintaining cost controls and expanding coverage," as Obama's domestic policy council Director Melody Barnes described it to the group.

More than 45 million Americans are uninsured even as Americans spend $2.4 trillion a year on health care. Reforming that calculus is at the top of Obama's domestic agenda.

Some advocates fear that the country's economic frailty will make it harder to achieve reform. The plan Obama pushed on the campaign trail, which calls for government, employers, families and individuals to keep sharing financial responsibility for health care, has been estimated to cost about $90 billion a year, to start with.

Democrats in the room repeatedly made the point that controlling health care costs is essential to the country's long-term economic stability — but that cost controls couldn't be separated from increasing coverage.

"Our deficit really cannot be controlled until we figure out how to deal with health care costs," said Rep. Henry Waxman, D-Calif., expected to be a leader in the House on health care reform.

The point was echoed by White House budget director Peter Orszag, who said "there's a logic" to doing both at once. A number of advocates noted that uninsured people create great costs to the health care system because they don't get preventive care, and when they do need emergency care insured people pick up the costly tab.

Philosophical differences emerged as Sen. Lamar Alexander, R-Tenn., proposed eliminating Medicaid, the government insurance program that covers certain poor and disabled people. That drew strong objections from Waxman and others.

Much talk focused on making improvements to the medical system that would pay off down the road, like investments in prevention, boosting the use of technology, and finding ways to reward doctors and hospitals for positive outcomes.

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SOCIAL SECURITY

As administration officials gathered with lawmakers and advocates to discuss Social Security, Treasury official Gene Sperling cautioned against expecting too much: "We're probably not going to solve this in 90 minutes."

House Republican leader John Boehner said everyone needs to be realistic about what Social Security can and cannot accomplish. He said officials should raise the retirement age to 70 over a number of years, phased in so that no one nearing retirement would be affected.

Boehner also said he doesn't have a problem telling people who have other sources of income that they simply aren't going to receive Social Security benefits despite paying into the system for years.

"Why don't we just admit we're broke?" Boehner said.

Boehner said that until 75 percent of the people understand the Social Security is in danger, there can be no solution that draws serious concern. In the meantime, it will be a punching bag for critics.

Sen. Lindsey Graham, R-S.C., said a bipartisan solution is the best option, and he pledged to stand between critics and the administration if officials would work across party lines.

"I will do everything I can to make sure the demagoguery doesn't succeed," Graham said.

Sperling, a Clinton-era official, indicated the administration wasn't about to rush, "regardless whether it is this year or next year."

Rep. Steny Hoyer, D-Md., said Obama has an opportunity in the crisis that perhaps the previous president, George W. Bush, lacked.

"I think the country is in such crisis, economically, that we'll all be compelled to look forward and create this consensus," he said.


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