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Obama, Senators to Discuss Budget Moves

Obama, Senators to Discuss Budget Moves

By Alexis Simendinger - December 26, 2012

Ending his holiday break early, President Obama expects to be back at the White House by midday Thursday to search with senators for an escape hatch to avert more than $500 billion in tax hikes and automatic spending reductions that take effect next week should Washington fail to act.

Senate Majority Leader Harry Reid, who conferred with the president this past Friday, is developing a possible fallback plan with the White House to extend the Bush-era tax breaks for families earning less than $250,000 annually. His plan would also postpone into 2013 the across-the-board federal spending cuts devised in 2011 as a way to compel lawmakers to rally behind a comprehensive deficit-reduction plan.

But to move legislation in the Senate with the Dec. 31 deadline fast approaching, Minority Leader Mitch McConnell would have to forfeit the minority’s filibuster options that require time and 60 votes, or would have to rally his members to agree to simple majority votes. And those members would want assurances that their concessions would be replicated in the House and thus end the impasse.

The Republican-led House this year passed legislation to extend all of the 2001 and 2003 tax cuts for another year, including those for the wealthy. And conservatives in the lower chamber previously adopted a bill to erase $50 billion in military cuts that would occur with sequestration in 2013. Instead, they promoted imposing $50 billion in additional cuts to programs popular among many Democrats.

Speaker John Boehner, House Majority Leader Eric Cantor, Majority Whip Kevin McCarthy, and Republican Conference Chair Cathy McMorris Rodgers reiterated their position through a jointly issued statement Wednesday:

"The House has acted on two bills which collectively would avert the entire fiscal cliff if enacted. Those bills await action by the Senate. If the Senate will not approve and send them to the president to be signed into law in their current form, they must be amended and returned to the House. Once this has occurred, the House will then consider whether to accept the bills as amended, or to send them back to the Senate with additional amendments. The House will take this action on whatever the Senate can pass, but the Senate first must act. The lines of communication remain open, and we will continue to work with our colleagues to avert the largest tax hike in American history, and to address the underlying problem, which is spending." 

Despite that insistence, the president and Reid have rejected the House bills as non-starters.

Obama has asked Congress to concentrate on areas of agreement: the desire to escape the potential recessionary wallop of living with statutory changes set for next week; to avert tax hikes for middle-class families; to avoid automatic spending cuts, including at the Pentagon; and to continue offering federal help to the long-term unemployed.

Although the Senate is to resume work Thursday, a way forward appeared uncertain Wednesday as news reports about the impact of “going over the cliff” took on a dirge-like tone.

Hopes for a significant, bipartisan $4 trillion deficit-cutting agreement before Dec. 31 ebbed after the House GOP’s failure to muster enough votes last week to adopt Boehner’s “Plan B” to raise tax rates on families earning more than $1 million. Boehner said his conference did not want to raise marginal tax rates.

Democrats are scrambling to draft a bill, or a series of measures, that might clear both chambers with the aid of a few House and Senate GOP helpers -- those who have said that when push comes to final votes, they want a deal before the cliff deadline. It appears that action on a smaller package remains a goal by Dec. 31, or within the first few days of 2013, but it is unclear that even a smaller, parachute deal could garner enough support on both sides of the aisle in both chambers.

The House is in holiday recess pending a 48-hour alert to return to Washington, if needed. A date for return to Washington is under discussion, a Boehner spokesman said Wednesday, but it would be dependent on action in the Senate. Obama had not spoken to the speaker during the holiday interlude, Boehner aide Brendan Buck told RCP. On Thursday morning, however, Obama spokesman Dan Pfeiffer tweeted that the president spoke with "all four congressional leaders" prior to leaving Hawaii for Washington. In a subsequent tweet, Buck said that Boehner “told the President yesterday that the Senate must now act. The House has already done so to avert the entire fiscal cliff.” 

Also on Thursday, a spokesman for McConnell acknowledged the president’s call, saying that minority leader “is happy to review what the President has in mind, but to date, the Senate Democrat majority has not put forward a plan.” 

The 113th Congress will be sworn in Jan. 3 with eight additional Democrats in the House and two additional Democrats in the Senate. (In Hawaii, Gov. Neil Abercrombie, a Democrat and an Obama supporter, on Wednesday named Lt. Gov. Brian Schatz to temporarily succeed the late Sen. Daniel Inouye, who died last week. Schatz will have to run in a special election in 2014 in order to serve out Inouye's full term, which extends through 2016.)

House Republicans will vote for speaker and other leaders of the conference on Jan. 3, and some lawmakers have suggested that Boehner is not only awaiting the next moves by Senate Democrats and Obama, but that he also might prefer to proceed after clearing his own re-election as speaker.

Boehner last week expressed confidence in his standing among his GOP colleagues, arguing they do not blame him for inventing a measure that would have raised tax rates on millionaires, and then pulling the bill when his conference balked. 

In a related development, Treasury Secretary Timothy Geithner informed House and Senate leaders on Wednesday that the nation will reach its debt ceiling on Dec. 31, and that “extraordinary measures” typically used to extend that window are being affected by the fiscal cliff uncertainty.

Given the unresolved tax and spending issues, Geithner said in a letter to Reid, McConnell, Boehner and House Minority Leader Nancy Pelosi, “it is not possible to predict the effective duration of these measures.” 

The president has sought authority to raise the debt ceiling as part of a fiscal-cliff agreement, a proposal that McConnell and other Republicans have rejected.

Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com. Follow her on Twitter @ASimendinger.

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