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Group of 6 senators hones plan to cut US deficits

By Stephen Ohlemacher

Associated Press

Published: Sunday, May 1 2011 9:20 a.m. MDT

The still unfinished plan faces many obstacles but has one important advantage. It's the only truly bipartisan effort in a Senate teeming with politicians promising to tackle the debt but lacking the trust needed to take politically poisonous positions such as cutting federal benefit programs and boosting tax revenues.

The goal is to release the plan within the next few weeks.

"I think a lot of people will be surprised at the support we get — from all corners," Warner said.

For Republicans, there's enormous political risk in embracing higher revenues, even if they come in the form of a tax overhaul that lowers overall rates while raising money through reducing credits, deductions and exemptions. Democrats face huge risks of their own, especially if they endorse politically dangerous cuts to Social Security.

Obama has shied away from tackling Social Security's problems and top Democrats in Congress, including Senate Majority Leader Harry Reid of Nevada and House Minority Leader Nancy Pelosi of California, have ruled out cuts in benefits, including changes that would only affect future retirees, such as raising the retirement age.

The plan by Obama's deficit commission, which the president did not endorse, would have nearly frozen the Pentagon's budget and cut spending at most domestic agencies. It called for gradually raising the retirement age for full Social Security benefits to 69 and curbing future cost-of-living increases. The full retirement age is currently 66, and is gradually increasing to 67 for people born in 1960 or later.

Income tax rates would fall, paid for by scaling back dozens of popular tax breaks, including deductions for mortgage interest and charitable contributions. Premiums for employer provided health insurance, which are now tax exempt, would be taxed eventually.

The Gang of Six supports changing the tax law, though senators have not decided whether they will offer a detailed plan or a series of targets for Congress to meet, with automatic spending cuts or tax increases if lawmakers fail, said a Senate aide familiar with the negotiations. Reid endorsed such a mechanism this past week.

The senators are discussing similar spending targets for defense and domestic agency budgets, Medicare and Medicaid.

"We want to make sure there's not an ability to punt," Warner said.

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