Time running out on 'fiscal cliff' deal in Washington

 

Washington

The contours of a deal to avert the year-end "fiscal cliff" are becoming increasingly clear. But progress has been slow, and time is running out for leaders to seal an agreement and sell it to restless lawmakers who so far have been given little information.

With hope still alive for a resolution by Christmas, President Barack Obama and House Speaker John Boehner, met Sunday at the White House, their first face-to-face meeting in nearly a month and their first one-on-one session since July 2011, when they last tried to forge a far-reaching compromise to tame the national debt.

Neither side would provide details, but White House spokeswoman Amy Brundage and Boehner spokesman Michael Steel released identical statements saying that "the lines of communication remain open."

Lawmakers say action this week is vital if Obama and Boehner hope to win approval by the end of the year for complex, bipartisan legislation that would raise taxes, push down social-safety-net spending and lift the federal debt limit.

"We're getting down to as late as it's physically possible to actually turn a framework into enactable legislation and then actually get it passed," said Sen. Chris Coons, D-Del., who is anticipating a complicated bill with "many real consequences for average Americans' lives." He added: "For senators to responsibly vote on a big, bold framework or package, we need time to review, debate and discuss this. And we are rapidly running out of running room."

In recent days, Boehner has called repeatedly on Obama to respond to an offer the GOP laid out last week. By Friday, a frustrated Boehner was complaining that, while the two sides continued to talk, there was "no progress to report."

It was not immediately clear whether that changed Sunday. But with written proposals from both sides now on the table, senior aides say the elements of a deal are coming into focus:

 

Fresh tax revenue, generated in part by raising rates on the wealthy, as Obama wants, and in part by limiting their deductions, as Republicans prefer. The top rate could be held below 39.6 percent, or the definition of the wealthy could be shifted to include those making more than $375,000 or $500,000, rather than $250,000 as Obama has proposed.

Obama wants $1.6 trillion over the next decade, but many Democrats privately say they would settle for $1.2 trillion. Boehner has offered $800 billion, and Republicans are eager to keep the final tax figure under $1 trillion, noting that a measure to raise taxes on the rich passed by the Senate this summer would have generated only $831 billion.

 

Savings from health and retirement programs, a concession from Democrats necessary to sell tax hikes to GOP lawmakers. Obama has proposed $350 billion in health savings over the next decade. Boehner has suggested $600 billion from health programs and an additional $200 billion from using a stingier measure of inflation, reducing cost-of-living adjustments for Social Security recipients.

 

Additional savings sufficient to postpone roughly $100 billion in across-the-board agency cuts set to hit in 2013, known as the sequester, and to match a debt-limit increase. The sequester, perhaps paired with an automatic tax hike, could then serve as a new deadline, probably sometime next fall, for wringing additional revenue from the tax code and more savings from entitlement programs.

 

If Obama and Boehner can agree on substance, Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Dave Camp, R-Mich., are already at work on a legislative structure.

"We're trying to get ahead of the curve here . . . to answer a lot of these technical questions about frameworks, guidelines — for both tax and entitlements," Baucus said.

Policy aides say both sides want to avoid the constraints of the budget reconciliation process and are instead focused on drafting two relatively simple bills. One would instruct the tax-writing committees to undertake an overhaul of the tax code and the other would order up legislation to improve the solvency of Medicare and Social Security.

Those measures are likely to contain little more than savings targets and some principles to guide work next year, aides said. Trying to get too specific would not only take time but also could kill any chance of passage.

Even settling on a health-care number could prove problematic. Democrats argue that anything over $400 billion in savings over 10 years implies unacceptable benefit cuts. And Republicans are certain to demand at least one specific policy that permanently changes the soaring trajectory of entitlement costs, a tough concession for Democrats.

"They want something to put on the wall, to say, 'OK, we gave on taxes. They gave on [entitlements],' " said Sen. Richard Durbin, D-Ill., the No. 2 Democrat in the Senate. "I hope we don't go that route, [but] we may end up facing it as the only way out of this."

Durbin argued against two ideas Obama tentatively endorsed in 2011 — raising the Medicare eligibility age from 65 to 67 and changing the inflation measure. The first would shift costs onto employers and Obama's new health-care initiative, analysts say, and the second would affect programs well beyond Social Security.

"Would a reduction in the COLA apply to disabled veterans' " benefits, Durbin asked skeptically. "Ready for that vote on the floor?"

Durbin said Democrats would prefer raising Medicare costs or reducing benefits for better-off seniors. After a presidential campaign focused on attacking Democrats for cutting Medicare to pay for "Obamacare," Republicans, too, might find that approach more palatable.

"My little sister, who makes [an average income], shouldn't be paying for Warren Buffett's Medicare. So there are different ways to skin this cat," said Rep. Patrick Tiberi, R-Ohio, a senior Ways and Means Committee member.

Some Republicans have also suggested scaling back the new health-care subsidies, which are scheduled to begin in 2014 for people making as much as 400 percent of the federal poverty level, about $92,000 for a family of four. And there's interest in setting per capita caps on payments to state governments for Medicaid, the health program for the poor.

While Democrats are anxious about shredding the safety net, Republicans are anxious about everything — and under heavy pressure to act. A Washington Post-Pew Research Center poll last week found that a majority of Americans would blame the GOP if talks between Obama and Boehner fail to avert more than $500 billion in automatic tax hikes and spending cuts set to hit in January, potentially sparking a new recession.

If the elusive deal with Obama fails to materialize, some senior Republicans are counseling Boehner to cut his losses and shift pressure onto the Democratic Senate by giving Obama exactly what he keeps asking for: House passage of a Senate-passed bill that would maintain current tax rates for 98 percent of taxpayers and let rates rise for the top 2 percent.

That measure would leave a huge mess in January: It contains no extension of emergency unemployment benefits, no payroll tax cut and no protection for doctors from a looming 30 percent cut in Medicare reimbursements.

Most problematic for Obama, the measure would not lift the $16.4 trillion debt ceiling. With the debt already nudging up against that cap, Republicans would have leverage to resume the fight over spending early next year.

"We don't have a lot of cards as it relates to the tax issue before year's end," Sen. Bob Corker, R-Tenn., said on "Fox News Sunday." "So a lot of people are putting forth a theory, and I think it has merit, where you go ahead and give the president . . . the rate increase on the top 2 percent, and all of a sudden the shift goes back to entitlements."

Pushing the Senate bill through the House is easier said than done, however. Even if every Democrat supported it, Boehner would need around 30 Republicans to sign on — an unappetizing prospect even for moderates.

"It fixes the political problem for Republicans, but it doesn't fix the problems" of the nation, said Rep. Steven LaTourette (R-Ohio), a close Boehner ally. "I'm willing to stand up against the tax rates unless there's something on the entitlement side."

So far, House leaders have rejected that approach. But whatever course Boehner ultimately chooses, lawmakers say the sales job must begin soon.

"I support the speaker's efforts" to negotiate with Obama, said Rep. Jeb Hensarling, R-Texas, an influential conservative. But "like every other member of the House Republican conference, I reserve the right to see whate

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