By Kevin Drawbaugh
WASHINGTON (Reuters) - Shaken by a historic debt downgrade, markets looked for signs that a congressional deficit reduction "super committee" would produce a fiscal policy breakthrough, but they were likely to be disappointed.
The panel -- whose 12 members must be named within one week -- was expected to do the bare minimum required of it, then kick the truly tough tax and entitlement reform issues down the road into 2012 and 2013, aides and analysts said on Monday.
The committee's direction will largely be set within days by the selection of its members, a job left up to congressional leaders seen as intent on naming loyalists who will not divert from party doctrines. Early favorites were starting to emerge.
Republicans were talking up Senator Rob Portman, who was a top Bush administration budget official, as an appointee.
Congressional aides and lobbyists said Portman, who headed President George W. Bush's Office of Management and Budget in 2006 and 2007, is loyal and knows the budget and the tax code.
"He'll hold the line on key GOP priorities, but do it in the most reasonable and agreeable way," one lobbyist said.
The panel is tasked with finding an additional $1.5 trillion in budget savings by November 23. Its recommendations must be voted on by Congress by December 23. If either deadline goes unmet, automatic spending cuts are triggered in 2013.
The Standard & Poor's downgrade of U.S. debt last week "will certainly place added pressure on the committee to tackle tax and entitlement reform," said FBR Capital Markets policy analyst Ed Mills.
But like other analysts, he forecast that the likeliest outcome will be for the panel to hit its minimum budget savings target to avoid triggering automatic spending cuts.
"S&P's downgrading of the United States' credit score from AAA to AA+ on Friday night has triggered a political firestorm," said MF Global policy analyst Chris Krueger.
The super committee has "an even larger spotlight now," he said. "The membership of the 12-person committee will be the best leading indicator of what to expect when the deficit reduction recommendations are due at Thanksgiving."
The 12-member panel will have six Republicans and six Democrats -- half from the Senate; half from the House.
Demands were also building for an open process in the deficit panel, which is expected be the most heavily lobbied body in Washington over the next four months and a potential gold mine of campaign donations for its members.
Senate Republicans filed bills that would require lawmakers to disclose campaign contributions more quickly while they are panel members, and to make panel meetings open to the public.
The senior leaders of both chambers -- Senate Democratic Leader Harry Reid, Senate Republican Leader Mitch McConnell, House Speaker John Boehner and House Democratic Leader Nancy Pelosi -- are very unlikely to serve on the panel, aides said.
But they will pick its members and rumors were flying in and around their offices about front-runners.
'GANG OF SIX' OFF THE LIST?
Republicans who were part of the Senate's bipartisan "Gang of Six" earlier this year were seen as unlikely to be named. This group in mid-July offered an ambitious but failed $3.75 trillion deficit reduction plan including tax code changes that hard-line Republicans viewed as unacceptable.
If the "gang" is "off the list" of Republican contenders for the panel, as some say, then Republican senators Tom Coburn, Mike Crapo and Saxby Chambliss would not be named.
Some aides saw Senator Jeff Sessions, the top Budget Committee Republican, as a contender.
In the House of Representatives, aides pointed to Democratic Party stalwarts Chris Van Hollen, James Clyburn and Xavier Becerra as possible appointees, as well as Allyson Schwartz, a senior budget committee member.
House Republican front-runners were seen as Paul Ryan, Eric Cantor and Dave Camp, as well as Jeb Hensarling.
(Editing by Howard Goller and Doina Chiacu)