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Senate Rejects Deficit Task Force

The Senate has rejected a plan backed by President Barack Obama to create a bipartisan task force to tackle the U.S. deficit this year.

The special deficit panel would have attempted to produce a plan combining tax cuts and spending curbs that would have been voted on after the November elections. But the plan garnered just 53 votes in the 100-member Senate, not enough because 60 votes were required. Anti-tax Republicans joined with Democrats wary of being railroaded into cutting government health and pension benefit programs to reject the idea.

Obama endorsed the proposal after being pressed by moderate Democrats. The proposal was an amendment to a $1.9 trillion hike in the government's ability to borrow to finance its operations.

The latest congressional budget estimates out Tuesday predict a $1.35 trillion deficit for this year as the U.S.economy continues to slowly recover from the recession.

The Congressional Budget Office report predicts a sluggish economic recovery and continued high deficits that present political problems for President Barack Obama and his Democratic allies. With the pressure on Democrats to to demonstrate they're serious about taking on the flood of red ink, President Obama is expected to propose a three-year freeze in the domestic budgets.

CBO Director Doug Elmendorf said Tuesday that "the outlook for federal budget is bleak."

The spending freeze, expected to be proposed by Obama during the State of the Union address on Wednesday, would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion.

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The freeze on so-called discretionary programs would have only a modest impact. The steps needed to really tackle the deficit include tax increases and curbs on benefit programs like Medicare, Medicaid and Social Security -- plans the special task force would have been tasked with creating.

Obama's three-year spending freeze will be part of the budget Obama will submit Feb. 1, senior administration officials said, commenting on condition of anonymity to reveal unpublished details.

It's likely to confront opposition on Capitol Hill, where a handful of powerful lawmakers write 12 annual appropriations bills. They've gotten used to hefty increases but now are being asked to tighten their belts. House Appropriations Committee Chairman David Obey, D-Wis., declined to comment, his spokesman said.

The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze.

The savings would be small at first, perhaps $10 billion to $15 billion, one official said. But over the coming decade, savings would add up to $250 billion.

The White House is under considerable pressure to cut deficits - the red ink hit a record $1.4 trillion this year - or at least keep them from growing. Encouraged by last week's Massachusetts Senate victory, Republicans are hitting hard on the issue, and polls show voters increasingly concerned.