Deal-breaker election looms over supercommittee negotiations

The final full week of supercommittee talks has become a chess match in which the goal is political survival in 2012.

Lawmakers say Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.) and Speaker John Boehner (R-Ohio) have taken a major role in the talks, with all three worried a bad deal could ruin their election strategies while angering key constituencies.

Democrats are relying on what they think is an advantage in leverage just nine days before the panel’s Nov. 23 deadline to submit a deal to Congress with at least $1.2 trillion in budget cuts.

While both parties are worried about the automatic spending cuts that would be triggered by a supercommittee failure, senior Republicans are especially fearful of those that would hit the military.

“Members would prefer to live with a stalemate than an unbalanced deal that is surrender to the Republicans, and that attitude is reflected in the leadership,” said a Democratic aide.

Democrats rejected a new offer from Republicans last week that, for the first time, suggested a GOP willingness to put new net tax revenues on the table.

The political goal of the proposal, which offered $300 billion in net tax revenues, was to show the GOP’s openness to negotiations and to blunt White House arguments about a do-nothing Republican Congress.

It reflected McConnell’s argument that President Obama is rooting against a deal to improve his campaign position next year, a charge Republicans began to rally around last week.

“I really don’t believe the president wants to have a deal,” Sen. Orrin Hatch (Utah), the senior Republican on the tax-writing Senate Finance Committee, told reporters.

“I can’t speak for our colleagues on the Democrat side on this, but I just question whether they really want a deal. Because what they’re asking, they know nobody in their right mind is going to give.”

Democrats balked at the GOP proposal, which they said would result in a heavier middle-class tax burden by lowering the top individual tax rate from 35 percent to 28 percent.

The standing offers are unacceptable to many lawmakers on both sides, with the two parties under increasing pressure from their political bases. While Democrats rejected last week’s GOP offer, Republicans ignored a $2.3 trillion Democratic savings plan because it would raise $1 trillion in new taxes.

Even with no deal in sight, sources said it remains possible lawmakers will agree to the minimum $1.2 trillion deal or something as large as $4 trillion.

Regardless of the package’s size, both sides would face political repercussions: Republicans by giving in on tax hikes and Democrats by agreeing to entitlement cuts.

One union strategist said Democrats would “kiss the senior vote goodbye” if they agree to cut Medicare and Social Security and receive little in return on taxes.

Conservative lawmakers, for their part, are beginning to grumble about a GOP offer to raise taxes.

“It’s just unacceptable to fall into this easy thing of ‘let’s raise taxes while we’re spending more this year than we did last year,’” said Sen. Jim DeMint (R-S.C.). “I just think we’ve forgotten the lessons of the last election.”

Aides noted that, unlike the talks to avoid a government shutdown in April and a potential national default in August, there is no “gun to the head” to pressure the supercommittee to make a deal.

Even if the automatic cuts were triggered, they would not go into effect until 2013, giving lawmakers plenty of time to change them.

Some Republicans would prefer to negotiate spending cuts after the 2012 election, when they expect to control the Senate and perhaps the White House as well.

Democrats, meanwhile, say it makes no sense to agree to entitlement reforms in exchange for modest tax increases this year, when they can force bigger concessions from Republicans when the Bush tax cuts expire at the end of next year.

As with the previous battles this year over spending, the fight in the supercommittee is expected to go down to the final days.

While GOP supercommittee co-chairman Rep. Jeb Hensarling (Texas) is fond of reminding reporters the panel has until midnight on Nov. 23 to finalize an agreement, committee rules stipulate that the proposal must be publicly available for 48 hours, meaning the deadline for a deal is just a week away. The Congressional Budget Office also has asked for time to evaluate the proposal.

The policy options have been well vetted after more than 20 months of intense examination.

“People know what needs to be cut and what needs to be done on the revenue side to get a deal — it’s a matter of political will,” said a Democratic aide with knowledge of the talks.

That is why lawmakers are holding out hope for a deal, even though little progress has been made.

Republicans finally agreed last week to raise new net tax revenues — a central Democratic demand — but they demanded income tax rates be permanently reduced across the board in return.

Senate Majority Whip Dick Durbin (D-Ill.) initially hailed the Republicans’ willingness to discuss revenues as a “breakthrough,” but Reid dismissed it as a “phony” offer and Durbin quickly backtracked, emphasizing that he did not support it.

The supercommittee has not had a full meeting in more than a week, although aides said members planned to meet through the weekend one-on-one and in small groups.

A Republican close to the talks said a path to agreement does not yet appear to exist.

Nevertheless, Sen. Patty Murray (D-Wash.), co-chairman of the supercommittee with Hensarling, insisted late last week that a major deal was still possible.
Her colleagues on both sides of the aisle, however, are skeptical.

“Although I’d like to see a proposal and vote on a proposal this year of $4 trillion, I’m a realist,” Sen. Mike Johanns (R-Neb.) said. “The biggest obstacle is the clock.”