WASHINGTON, DC — White House officials and Congressional leaders hoping to stave off — or at least postpone — a “fiscal cliff” threatening to send the country into economic disarray could, in typical Washington fashion, opt for a mixture of action and delay in the hopes that this time, another year will give them the time to find a long-term solution.
Negotiators say that an option that has been discussed, though only preliminarily, would be an agreement requiring an upfront “down payment” revenues and spending cuts, the creation of a process aimed at creating a long-term solution, and a back-end “trigger” that would impose severe cuts to spending, particularly on entitlements while increasing taxes.
That’s just one possible conclusion, people involved in the talks told BuzzFeed, to negotiations that got off to a slow start this week, with neither Democrats nor Republicans willing to show much of their hand in the opening days.
But with only a few weeks between now and the end of the year, congressional aides in both parties expressed cautious hope that a deal could ultimately come together to punt the bulk of the problem down the road for a year while immediately raising revenues and locking in dramatic reforms to entitlement spending.
All sources stress that it is still too early to make any pronouncements about the negotiations — aides to President Obama, Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell have only held two substantive opening-round sessions.
And everyone agrees there are massive roadblocks still in the way of any sort of deal, ranging from Obama’s demand that upper tax rates go up to Republicans’ insistence that serious reforms be imposed on entitlement programs.
The down-payment-and-trigger combination would be a classic inside-the-beltway solution to an impossible political situation: Push off a final decision for another year, agree to a set of benchmarks to measure negotiations and agree to, at least for now, a series of painful “triggers” designed to ensure a good faith effort.
And if it sounds familiar, it should — Congress and the Obama administration agreed to a similar, if less painful, agreement known as the “sequester” last year that ended up creating the fiscal cliff dilemma in the first place.
But now, as then, the problems are legion and any one detail could easily derail the idea. For Democrats, in many ways including a down payment in a deal is the most crucial piece of the puzzle, since it is likely their best chance to lock in significant new revenues.
“The framework that the leaders and the president decided on on Friday includes a down payment to enact before the end of the year,” a Senate Democratic aide familiar with the talks said. Beyond that, however, there is little agreement.
Democrats envision the down payment as letting the tax cut for $250,000 income expire while including significant upfront spending cuts.
Republicans, however, said that there is little chance they will ultimately agree to any deal that includes a change to tax rates; though there could be room for an agreement based on some sort of cap on tax loopholes for upper income earners that would increase their share of the overall tax burden.
Overcoming that hurdle is extremely daunting and has led some Republicans familiar with the talks to express skepticism. Specifically they complain that Obama and top Democrats are little more than a “political win” and will do little to actually swell federal coffers.
“It’s his pride,” said one veteran Republican of Obama’s insistence on including tax increases for the wealthy, noting he has made it a key part of his promises to his bas.
Republicans say they doubt Obama’s seriousness, because of the response to the “fiscal cliff” from liberals, who have increasingly sought to downplay the seriousness of the situation facing the country.
With Obama allies like Labor leader Richard Trumpka arguing the economic impacts will be far less painful than thought, Republicans worry Obama is sending a signal he’s unwilling to bend to any GOP demands, even if it torpedoes a compromise.
One Republican also noted that the White House has made clear Obama wants any down payment — or indeed any deal at all — to also preemptively address the debt ceiling increase that is expected to be needed in February. But in order to do that, Democrats will have to agree to even more cuts in spending, something that Democrats have resisted in the past.
On the other end of the deal is what aides alternately describe as a backstop or trigger designed to impose significant pain on both parties. Unlike the sequester, which Republicans have bitterly complained hurts their priorities far more dramatically than Democrats’ because of cuts to defense spending, in theory this new trigger would include a significantly bigger bang
For instance, rather than focusing on defense and discretionary spending, as the sequester did, the new trigger could include mandatory tax increases, a pressure point for Republicans, while slashing spending on Medicare and Medicaid as a Democratic arm-twister.
Republicans are, so far, the chief proponents of a backstop or trigger. For GOP leaders to sell any deal to their disillusioned rank and file, aides said, the trigger would have to extract major concessions from Democrats. And like the down payment for Democrats, it provides a key guarantee of winning a long-sought-after policy goal in those reductions.
“The second stage is not something we’re opposed to, but it’s something Republicans want to focus on in order to sell the deal,” a Democratic aide said.
“That’s not decided yet but in theory it would be … I imagine Republicans would insist on it,” the aide added.
But the details of the trigger are as nebulous, as are those of the down payment, and speculation on the hazy negotiations can be treacherous. Democrats are insisting that Republicans outline the size and type of reductions to entitlements they would insist on, which has rankled some Republicans who want to see a good faith proposal from Democrats to prove they are serious about reforms.
And in between those bookends would be the third piece of the puzzle — a process for overhauling the tax code and to provide a more long-term solution to the nation’s fiscal woes. That part of the plan appears to be the vaguest, with one aide saying it could include specific benchmarks for negotiators to meet between January and the end of the year.
Despite all the uncertainty and lack of details, at least some aides said they have hope a deal can be struck.
“Right now I’m optimistic because the people I’ve talked to who’ve been in these meetings have been projecting optimism,” a senior Republican aide said Tuesday.