'Gang of Six' Desperate to Find Budget Solution

"The rumors of our demise are exaggerated," said one Senate aide familiar with the Group of Six's work.

The Obama administration and Congress are desperately searching for a bipartisan deficit-reduction deal. Getting one would clear the way for critical legislation to increase the U.S. government's borrowing authority.

Washington's failure to increase the $14.3 trillion U.S. debt limit would put the government on the cataclysmic path to a first-ever default on its debt obligations in early August.

Lately, the spotlight has shone on what's being called the "Group of Six Plus One" to save the day: Biden, three senators and three leading members of the House of Representatives.

They carry plenty of political heft and the ability to whip rank-and-file members of Congress into supporting a potential deal to enact a wide range of spending cuts.

But it is the Senate's Group of Six, which is avoiding the limelight, that is seen as having the heavyweight expertise to sort out complicated budget issues, along with the willingness to consider tax increases and popular benefit program cuts needed for a long-term fix of the country's fiscal mess.

"Everybody (in the Senate's Gang of Six) has a sense of urgency and wants to get an agreement soon. Hopefully, they'll work out the remaining issues that need to be addressed and announce a deal," said another aide familiar with the talks.

That is not to say their work is mostly done. "There are a number of remaining issues," the aide added.

A third aide said the six senators were "slogging through the issues one would expect to be difficult, which would be entitlements and revenues."

Without reform, entitlements -- the huge federal retirement and healthcare benefit programs, including Social Security, Medicare and Medicaid -- are on track to escalate government debt inexorably as the U.S. population ages.

REVENUES A TOUCHY SUBJECT

Taxes, and whether to increase them in any way, are a touchy subject too -- and an idea most Republicans loathe.

With widespread acknowledgment that entrenched differences over entitlements and taxes can't be fully resolved in time to deal with the debt limit, Biden and Congress might decide to kick them down the road.

And that's where the Senate Gang of Six comes in.

"The best shot for a big deal to reduce the annual deficits and the long-term debt rests with the Gang of Six," said Ethan Siegal, a policy analyst with The Washington Exchange, which tracks political developments for institutional investors.

"If you look at the ideological makeup of those six guys, if they can reach an agreement on fundamental policy issues ... it could be a harbinger of the ability to get 60 votes on the Senate floor" needed to overcome procedural roadblocks.

Siegal and other analysts said there are fears that sooner or later, bond market and currency traders and investors could become spooked by out-of-control annual budget deficits and cumulative debt.

If that were to happen, the work of the Gang of Six, assuming it comes to fruition, could be what everyone looks to for salvation -- be it in 2011, 2012 or beyond.

In the meantime, Senate Budget Committee Chairman Kent Conrad, also a member of the Gang of Six, could soon unveil a Democratic budget plan, one that would reduce deficits by around $4 trillion over 10 years, in part by raising tax revenues.

His budget blueprint would give the Senate Appropriations Committee marching orders on how to dole out federal funds for the fiscal year starting Oct. 1.

Even if it were to clear the Democratic-controlled budget panel, Conrad's budget may never see the light of day in the full Senate, according to one senior Senate Republican aide.

That, in turn, could mean the Gang of Six "theoretically is the only game" in town addressing long-term deficits in a detailed way, said the Republican aide, who has nonetheless been skeptical of progress.