With support growing for a $3.7 trillion bipartisan Senate "Gang of Six" deficit reduction plan, the original group met all together, by themselves, for the first time in months Tuesday afternoon to plot their next move given their newfound possibilities, including significant presidential praise.
Emerging from a one-hour meeting behind closed doors in Gang member Saxby Chambliss' office looking a bit stunned by their surprising success, Sen. Kent Conrad, D-ND, said of the next step, "Colleagues are going to be asked to sign a letter of support" to Senate leadership, this to determine concrete support for their proposal.
Conrad, the Budget Committee Chairman, said the group would meet again Wednesday.
"We've talked to leadership this morning. We'll see what the night brings," the chairman said, adding, "One possibility that's being discussed is that this special congressional committee would have (the Gang plan) as a fallback or maybe as the basis of their discussions. That's two different options. We're talking and exploring options."
The "congressional committee" reference is one component of a last resort plan being crafted by Senate leadership to avert a debt default, something the Treasury Department has said will happen if Congress fails to sanction a $2.4 trillion debt ceiling increase by August 2. The leadership plan would give the President the authority to raise the limit himself in three installments before the 2012 election, possibly include about $1.5 trillion in spending cuts in the process, and create a new fiscal committee tasked with finding additional savings government-wide.
The Gang members are now starting the long, difficult process of putting their plan into legislative language, a process that Gang member Dick Durbin, D-Ill., predicted would take far too much time to have it considered on the floor before August 2, though Conrad held out hope that it could be completed in time.
One significant note, however, Conrad said that just the mandatory savings from the bipartisan talks with President Obama was going to take two weeks to be analyzed by the nonpartisan number crunchers at the Congressional Budget Office, and a CBO score must be in hand to have legislation considered.
This lack of detail in the Gang plan, and no doubt the fast pace of support, prompted concern from a number of senators.
"It's a significant event. However, we still do not have a legislative text to evaluate," said Alabama's Jeff Sessions, top Republican on the Budget Committee.
Questioning how savings on the revenue side, an estimated $1 trillion over 10 years, is found and expressing a need to see details, Sessions took particular exception with the plan's discretionary spending cuts.
"The authors note that, in effect, the discretionary savings will be achieved by a freeze on spending at current levels. There would be no net spending cuts. We must have true reduction of current levels since baseline discretionary spending has increased 24 percent in the last 2 years-we cannot ‘freeze in' this inflated level," Sessions said.
But a Gang source countered, "We shift to chained-CPI (Consumer Price Index) government-wide by 2012, for one. That, alone will result in significant savings."
Chained-CPI does not require cuts in spending but is estimated to produce hundreds of billions in savings over a decade. It "employs a formula that reflects the effect of substitution that consumers make across item categories in response to changes in relative prices," according to the Bureau of Labor Statistics. In other words, if the price of bananas goes up, consumers might switch to lower-cost apples instead of suffering the higher price of bananas.
"To go to the chained CPI is a better way to calculate the increase in payments that have to be given out," praised Sen. Kay Bailey Hutchison, R-Tex., who said she would be supporting Gang the plan. The reference is mostly to slowing the growth of cost of living adjustments in federal programs like Social Security. The Gang plan, in its draft form, would gradually phase in this shift for Social Security beneficiaries five years after the plan is enacted.
Sessions also took aim at the revenue portion of the plan, saying, "Overall, it would seem taxes under this proposal will go up by at least $1 trillion."
Some Republican aides added to that skepticism, noting that the Gang plan uses a what they see as a false baseline that assumes the Bush-era tax cuts will expire, thus resulting in more revenue.
Chambliss defended the plan saying that its call for overall tax rate reduction is exactly what Republicans have been seeking and will more than offset the expiration of the Bush-era cuts. "What you have to remember," Chambliss said, "We're reforming the tax code, and we're going to reform it, hopefully, in advance of the expiration of (the Bush) tax cuts, so that we're going to have an entirely new tax code within which individuals and corporations operate."
Meanwhile, the Gang gathered up significant support, including the first member of Senate GOP leadership, Sen. Lamar Alexander, R-Tenn..
Two self-described Gang "cheerleaders," are also pushing the plan put together by their colleagues.
Sens. Mike Johanns, R-Neb., and Mike Bennet, D- Colo., emerged from the Tuesday afternoon Gang meeting to help their colleagues chart a way forward. Both said they are trying to help rally their respective caucuses around the plan.
Calling himself "as conservative as any member on (the Senate) side," Johanns said he could easily sell the plan to fiscal hawks. "This plan, when you boil it all down, it's a mixture of approaches that says, ‘Grow the economy. Grow jobs. Give us a better opportunity to...get a competitive plan worldwide.' Here's what I would say... ‘Bringing rates down and simplifying the tax code is exactly the Reagan philosophy.'"
Johanns, like Chambliss, predicted there would be the opportunity to significantly expand federal government revenues through tax code reform, righting the wobbly U.S. fiscal ship.
"I think it's the most encouraging thing I've seen since I came to Washington," Johanns said.
Smiling alongside his fellow cheerleader, Bennet said, "I'm smiling because saying it's the best thing you've seen since you've come to Washington is a pretty low bar for a lot of us that came here recently, but it is nice to see something as thoughtful as this proposal."
But the lawmakers, despite their success Tuesday, are far from getting a deal. The Gang's work is only just beginning, in some respects, despite a year's worth of work by its members.
"The first test is, how many of our colleagues stand up and say ‘yes'. We saw a very strong and positive support this morning. We're seeking to get greater clarity based on signatures on a letter. And we'll see where that ends up," Conrad said.
"Sen. Chambliss and I started a year ago last Friday, our first meeting," Sen. Mark Warner, D-Va., said with a sigh, as reporters joked about his clear accounting of time lapsed. The two senators conceived of the Gang as a way to a bipartisan compromise, though at times, through the roller coaster ride of up's and down's, it appeared any bipartisan product was dead.
"I wish that we could have been out months ago to kind of build public support, business support, but we are where we're at," Warner said, "I think we all agreed that the most important item is that we don't default on our debt. The second step in this is making sure you've got a long-term debt reduction plan. Today the consensus seemed to be that this was balanced, comprehensive, and bipartisan - those are three words that you've not heard a lot out of in this town lately."