Yesterday, John Boehner appeared to wave a white flag on talks aimed at resolving the fiscal cliff. Harry Reid reacted to that with disappointment, saying that there’s still time for a deficit reduction deal. But the real endgame – at least for the lame duck session – is coming into focus.
A bipartisan group of senators is negotiating a roughly $55 billion debt “down payment” that would temporarily turn off automatic spending cuts and buy Congress at least six months to work out a bigger deal.
The down payment would be linked to a deficit-reduction framework that would bind committees with jurisdiction over spending and taxes to an action plan, say sources familiar with the negotiations.
If a deal is reached and leaders sign off on it, Congress could approve the plan in a lame-duck session.
You can totally see this happening, right? The $55 billion would be enough to stop the sequester of defense and discretionary cuts for six months. That would give the breathing space needed for a longer discussion. The calculus may change depending on the outcome of the elections. But it’s clearly easier to get to $55 billion than $1.2 trillion, which is the ten-year cost of the sequester.
More troubling is that we don’t know where those $55 billion in cuts will come from. Specifically, will they include any tax increases? So far, all of the deficit reduction agreed to, mainly from the spending cap and the sequester, which would drive down discretionary funding to levels so low that the federal court system would have to stop jury trials because they could not pay the jurors, has come on the spending side of the ledger. Nothing has come from the tax side. Saxby Chambliss, one of the leaders of this “Gang of 8″ effort in the Senate, said that the $55 billion down payment would “not necessarily” include revenues. (The other members of the group are Democrats Mark Warner, Kent Conrad, Dick Durbin and Michael Bennet, with Republicans Chambliss, Mike Crapo, Tom Coburn and Lamar Alexander.)
And then there’s this “binding framework” for a future deficit deal. Now, nothing’s really binding in Congress. But whatever gets decided would probably have to have a bipartisan backing to get through Congress. And we know the President supports a grand bargain. This punts things into the next Congress, the makeup of which is unknown.
Just replacing the trigger with nothing is probably off the table, as the Administration and key Senators seem to want to keep the forcing event for a grand bargain alive.
The only unusual part that may come of this is an extension of the payroll tax cut for six months as well, at least according to Sen. Alexander. Previously, the payroll tax cut was seen as a goner. Alexander alluded to the idea of the debt limit, which is coming up again, being put on hold until June and getting folded into this as well.
The point being, the six-month punt is on the table. And it would only delay, not derail, a grand bargain. In fact it would facilitate it.