* At key meeting, Toomey proposal sparked hopes of deal
* Limiting deductions, means-testing among ideas discussed
* After trust evaporated, both sides blame intransigence
* Ideological gulf on tax and spending was too big
By Richard Cowan, Thomas Ferraro, Tim Reid and Donna Smith
WASHINGTON, Nov 22 It didn't seem like mission
impossible just two weeks ago.
Inside a private room on the first floor of the U.S.
Senate, seven members of Washington's debt "super committee,"
munching beef jerky and talking taxes, thought for the first
time a deal might be at hand.
Nine days after that Nov. 7 meeting, it was all but over.
Accusations of media leaks and bad faith had led to a fatal
breakdown of trust among committee members fundamentally
divided over the ideology of taxation and spending.
Trust that had been so painstakingly built by the six
Republicans and six Democrats since the panel first began
meeting nine weeks earlier unraveled at alarming speed.
By Nov. 16 the super committee was essentially dead,
according to interviews with senior aides and officials with
intimate knowledge of the talks.
The pivotal moments came on Nov. 7 and 8 in the private
first floor office belonging to the Senate Finance Committee,
chaired by Senator Max Baucus, one of the Democrats who sat on
the debt panel.
The Nov. 7 evening meeting, which lasted nearly three
hours, offered the first glimmer of hope that the panel might
succeed in reaching a deficit-cutting agreement to meet its
mandate: find at least $1.2 trillion in budget savings over 10
"November 7 was kind of like the climax so to speak," one
Republican congressional aide with knowledge of the
Inside Baucus's finance committee hideaway were seven of
the 12 panel members: Republicans Pat Toomey, Rob Portman, Fred
Upton and Dave Camp; and Democrats John Kerry, Max Baucus and
Chris Van Hollen. The seven lawmakers convened at a critical
moment for the debt panel, as the Nov. 23 deadline for a deal
was just over two weeks away.
Just like that evening, for the previous nine weeks both
sides had been meeting largely in secret and had been
relatively successful in keeping their discussions private and
out of the press. In the coming days that was going to change.
For more on the deficit-cutting panel [ID:nUSDEBT]
SNAP ANALYSIS-Fallout from panel failure [ID:nN1E7AJ0AL]
For a graphic, click on link.reuters.com/qyj25s]
Up to this point, trust had been built, and nurtured, on a
committee formed after the debt limit crisis of the summer.
Kerry and Portman had discovered a mutual passion for
cycling and regularly rode together. Committee members would
often treat the other panel members to lunch during their
meetings in Room 200 in the bowels of the U.S. Capitol.
Four dozen cupcakes were ordered to celebrate the birthday
of Senator Patty Murray on Oct. 11, but they were not destined
for the super committee. The panel did not meet until the
following day so the chocolate and red velvet cakes were sent
to her office and eaten by her staff - although the panel
members still sang Happy Birthday to their Democratic co-chair
on Oct. 12.
After a first meeting on Sept. 8, the next three weeks were
taken up with discussions over how many meetings should be
held, and when and where. Murray and congressman Jeb
Hensarling, her Republican co-chair, had to resolve who got to
hold the gavel. In the end a compromise - something very rare
in Washington - was agreed. They were to alternate it.
GIVE AND TAKE
When the Nov. 7 Baucus meeting began, the seven members
there were ready to get down to brass tacks - although the
session did not start well, according to both sides.
It opened with a discussion of a new Democratic proposal to
raise taxes by $1 trillion, cut spending by $1 trillion, and
spend another $300 billion to stimulate the economy.
The issue of tax increases had been a red flag for
Republican negotiators all year, especially as most Republican
members of Congress - including all six on the debt panel - had
signed an anti-tax pledge authored by the powerful Washington
conservative Grover Norquist.
"Grover Norquist has been the 13th member of the super
committee without being there," Kerry lamented to CNN on
At the mention of $1 trillion in tax hikes, according to
aides, two of the Republicans threw up their hands. One thumped
the table with his fist to emphasize their adamant opposition.
And as usually happened when discussions had become tense
on the panel, staff were asked to leave so that the committee
members members could "vent," one aide said.
But then things got interesting. Toomey, a conservative,
offered a new proposal that for the first time for a debt
committee Republican included the prospect of revenue
increases, as well as spending cuts, as a way to start cutting
America's massive $15 trillion national debt.
Toomey's proposal called for limiting tax deductions and
claimed $250 billion in "static revenue" to be used for deficit
reduction, and another $50 billion boost from greater economic
activity as the result of reforming the tax code and lowering
all tax rates.
"The attention shifted to Toomey. It became the counter
offer to the initial Democratic offer," an aide said.
The Democrats immediately rejected Toomey's proposal on
revenues as too low, but Kerry began to explore the idea of
building on it.
Kerry threw in the "mutual idea" of means-testing Medicare
benefits, the federal insurance program for the elderly and
disabled. Soon the discussion turned to how they could build on
the Toomey plan, through other measures such as raising
Medicare premiums and the sale of federal leases.
What initially became hardline opposition to the Toomey
proposal became an opportunity for negotiation. "Maybe we can
work a deal," the Republican aide quoted Kerry as saying.
"There was real optimism when they walked out of the room,"
the aide added.
But that was the high water mark for the debt super
committee. Things were to change quickly.
"The Toomey offer was the beginning of the end," a senior
Democratic aide said.