By Alexander Bolton - 11/19/11 12:28 PM EST
Senate Majority Leader Harry Reid (D-Nev.) and House Speaker John Boehner (R-Ohio) are ready to tango once again on spending cuts and taxes but this time the balance of power favors Reid.
Democrats say Boehner and his GOP colleagues lack the leverage they had earlier this year, when congressional inaction would have resulted in a government shutdown or default.
Reid’s party is more willing to accept the consequences of a deadlock this time than Republicans, several of whom have already vowed to attempt to repeal $500 billion in automatic cuts to the defense department.
A senior GOP aide scoffed at the notion of a Reid advantage as “untethered from reality,” but a shift can be observed in Reid’s rhetoric.
When circumstances gave Boehner more leverage earlier this year, Reid buttered up his negotiating partner in public.
He reached out to Boehner after the Nov. 2 election, praising the GOP leader as “a consensus guy” who is “willing to work with us.”
In April, Reid told The New York Times, “I don’t like [Boehner’s] legislation, but I like the way he is running the House.”
Now that Reid has the advantage, he’s talking a lot tougher.
In recent weeks he has blasted GOP leaders for abdicating their leadership role and letting conservative anti-tax activist Grover Norquist, president of Americans for Tax Reform, dictate policymaking.
“My Republican friends, those poor folks, are being led like puppets by Grover Norquist,” Reid told reporters this month. “They’re giving speeches that we should compromise on our deficit. Never do they compromise on Grover Norquist. He is their leader.”
With the supercommittee deadlocked and members beginning to doubt they can reach a deal on their own, Reid and Boehner are stepping into the spotlight.
Congressional aides say they expect the two leaders to talk over the weekend, though they cautioned they are not likely to “dive in” unless the supercommittee makes substantially more progress toward an agreement.
Reid plans to stay in Washington over the weekend. Michael Steel, a spokesman for Boehner, said his boss would be “in close contact with members of the Joint Select Committee on deficit reduction.”
The two leaders met Tuesday morning to discuss the supercommittee and other topics. Reid’s chief of staff David Krone and Boehner’s top aide Barry Jackson are keeping in regular contact, as well.
Reid said on Tuesday he would oppose legislation to unwind the $1.2 in automatic cuts that would take place if the supercommittee fails to produce a deal.
Rep. Xavier Becerra (D-Calif.) said Friday that he would not consider a failure if the supercommittee deadlocks, triggering those automatic cuts.
“Sequestration will give us progress whether we like it or not. I’d rather have a human hand fashioning the progress than, as I’ve said before, the blunt edge of a guillotine deciding what progress looks like. [But] any time you can get $1.2 trillion in savings, that’s not failure,” he said.
Republicans have spoken out more forcefully against such a scenario.
“My view is failure is not an option,” Senate Republican Leader Mitch McConnell (Ky.) told reporters this week.
Sen. John McCain (Ariz.), the senior Republican on the Senate Armed Services Committee, has vowed legislation to stop defense cuts.
Reid believes the impending expiration of the Bush tax rates gives him another significant lever, according to Democratic sources.
If Republicans refuse to give enough ground on taxes this round, Democrats believe they will have a stronger hand at the end of 2012, when the top tax bracket is scheduled to revert to 39.6 percent. The Joint Committee on Taxation estimates it would cost nearly $4.4 trillion to extend the Bush rates and Alternative Minimum Tax relief from 2013 through 2022, not counting the additional cost of servicing the debt.
Simply mustering 40 votes to block an extension would give Democrats four times the tax revenue they’ve requested. Democratic lawmakers oppose raising taxes on middle-class families but some Democratic policy experts think it’s the best way out of the fiscal morass.
Peter Orszag, President Obama’s former budget director, wrote in a New York Times op-ed last year that Congress should extend the Bush tax rates for two years and then let them all expire. Congress took the first step in December when it extended virtually all of the Bush rates for two years.
Orszag argued the nation’s economy boomed under former President Bill Clinton, before the tax cuts of 2001 and 2003. He acknowledged that middle-class families would see taxes rise but said that cannot be avoided.
“Middle-class and lower-class families would be saddled with higher taxes. That’s a legitimate concern, but also a largely unavoidable one if we are to tackle the medium-term fiscal problem,” Orszag wrote.
A senior Democratic aide said the pending expiration of the rates gives Reid more leverage in talks with Boehner than he had in April and August.
Boehner felt he won the last round of sparing.
“When you look at this final agreement that we came to with the White House, I got 98 percent of what I wanted. I'm pretty happy,” Boehner crowed in a CBS interview.
That relationship could prove instrumental to getting a deficit-reduction agreement out of the supercommittee. But to do that, Boehner needs to make a significant concession on taxes.
A Democratic aide said Democrats will not accept a package that is not fair and balanced and includes hundreds of billions of dollars in tax increase. They quickly rejected a proposal Friday to cut more than $600 billion in spending while raising only $3 billion in new tax revenues by eliminating tax breaks for corporate jets.
In September, Obama threatened to veto “any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share.”
But it will nearly impossible for Boehner to take the political risk of agreeing to a deal that raises tax revenue by eliminating deductions without permanently extending the Bush tax rates (or lower rates). Signing off on such a proposal could open him to a leadership challenge from House Majority Leader Eric Cantor (R-Va.) or another conservative.
A would-be challenger for the speaker’s gavel could argue a deal that raises taxes risks the House Republican majority.
“If Republicans raise taxes now, they don’t win the Senate, and if Republicans raise taxes now they might not keep the House,” Norquist told The Hill Monday. “It’s the only way to lose the House.”