By Alexander Bolton - 09/12/12 09:00 AM EDT
A bipartisan group of senators is negotiating a roughly $55 billion debt “down payment” that would temporarily turn off automatic spending cuts and buy Congress at least six months to work out a bigger deal.
The down payment would be linked to a deficit-reduction framework that would bind committees with jurisdiction over spending and taxes to an action plan, say sources familiar with the negotiations.
If a deal is reached and leaders sign off on it, Congress could approve the plan in a lame-duck session.
All of the George W. Bush-era tax rates are set to expire at the end of the year, and automatic spending cuts to defense and non-defense programs, known as sequestration, are scheduled to begin in January. Congress also faces a decision soon on raising the nation’s debt ceiling.
Speaker John BoehnerJohn Boehner56 memorable moments from a wild presidential race Trump may pose problem for Ryan in Speaker vote Conservatives backing Trump keep focus on Supreme Court MORE (R-Ohio) on Tuesday said he was “not confident at all” that Congress and the White House could work out a major debt deal, while Senate Majority Leader Harry ReidHarry ReidObama in Nevada: 'Heck no' to Trump, Joe Heck Dems double down on Nevada Latino vote Heck's rejection of Trump imperils Nevada Senate race MORE (D-Nev.) said it was too early to give up hope.
The $55-billion down payment under discussion by the group of senators would be equal to about half of the scheduled cuts triggered by sequestration next year to defense and non-defense spending.
But the bipartisan group faces several hurdles to reaching a deal — most notably whether any tax increases would be included in the $55-billion package. This fight has doomed previous efforts to reach a grand bargain deficit-reduction plan.
Democratic negotiators say the down payment must include measures to raise new revenues, but Republicans have yet to agree.
Sen. Saxby ChamblissSaxby ChamblissWyden hammers CIA chief over Senate spying Cruz is a liability Inside Paul Ryan’s brain trust MORE (R-Ga.), one of the key negotiators, said the down payment would “not necessarily” include tax revenues.
“We’re exploring options. We’re looking at all different types of combinations that might be available,” he said.
Another problem is Senate leaders, who are skeptical the group can come up with a deal that will pass muster with the entire Senate and House.
Senate Democratic sources, however, argue it is more viable than plans floated by Sens. John McCainJohn McCainLots of (just) talk about 'draining the swamp' 56 memorable moments from a wild presidential race Is Georgia turning blue? MORE (R-Ariz.) and Lindsey GrahamLindsey Graham56 memorable moments from a wild presidential race High anxiety for GOP NYC mayor: Trump sounds like ‘a third-world dictator’ MORE (R-S.C.) that would stop the sequester and replace it with a different package of spending cuts and revenue-raising measures.
Some lawmakers think the McCain-Graham plan would undermine the impetus for fiscal reform, and the GOP effort could also face opposition from President Obama.
“I don’t think the president would agree to anything that turns off the sequester unless there was the big deal agreed to,” said a Senate aide, who was voicing a personal opinion and not speaking for the administration.
The core of the bipartisan group includes Chambliss and Sens. Mark WarnerMark WarnerPolicymakers face long road to financial technology regulation Liberal groups urge Schumer to reject Bayh for Banking gavel Why Yahoo's breach could turn the SEC into a cybersecurity tiger MORE (D-Va.), Kent Conrad (D-N.D.), Dick DurbinDick DurbinGreat Lakes senators seek boost for maritime system Wikileaks: Durbin pushed unknown Warren for Obama bank regulator The Hill's 12:30 Report MORE (D-Ill.), Michael BennetMichael BennetSenate poll raises Republican hopes in Pennsylvania, Florida Podesta floated Bill Gates, Bloomberg as possible Clinton VPs GOP Senate candidate reverses course, says he’ll vote Trump MORE (D-Colo.), Mike CrapoMike CrapoSenators urge resolution of US, Canada softwood lumber deal GOP senators avoid Trump questions on rigged election More Senate Republicans pressure Treasury over debt-equity rules MORE (R-Idaho), Tom CoburnTom CoburnRyan calls out GOP in anti-poverty fight The Trail 2016: Words matter Ex-Sen. Coburn: I won’t challenge Trump, I’ll vote for him MORE (R-Okla.) and Lamar AlexanderLamar AlexanderObama meets a crossroads for his healthcare law Music streamer Spotify joins Gillibrand’s push for paid family leave GOP senators avoid Trump questions on rigged election MORE (R-Tenn.). They have been known at varying times as the Gang of Six, the Group of Six and the Gang of Eight.
With the White House and Congress focused almost exclusively on the election all year, there has been little hope of moving a larger deficit-reduction package this year.
A lame-duck session would provide little time to negotiate a grand deal.
“The logical thing for us to do in the lame duck is to put everything on hold for six months and to give ourselves time to do a good job of solving all the fiscal-cliff problems at once, from sequestration to payroll tax to Bush tax cuts,” said Alexander.
Alexander said a down payment would “show good faith.”
“If we put everything from the debt ceiling to the Bush tax cuts and the sequestration on hold for six months while we worked out a solution, I think it would be necessary to buy the six months of time,” he said.
Chambliss said a down payment would be attractive because it could solve the problem of timing the sequence of a deficit-reduction plan. Republicans and Democrats disagree over whether entitlement reform, discretionary spending cuts or tax reform should take place first.
Durbin floated a similar idea last week during the Democratic convention in Charlotte, N.C. Speaking at a breakfast sponsored by Bloomberg LP and the Peter G. Peterson Foundation, Durbin said Congress could “buy” a six-month delay of the fiscal cliff with a down payment.
“The notion is that we have to come up with the savings to show we’re serious,” he said, according to Bloomberg News. He called it “the Dick Durbin plan.”
To get Reid to sign on, the down payment would have to lock the committees of jurisdiction and Republicans into concrete guidelines for a larger deficit-reduction package, say Democratic sources.
That could be difficult. Some critics are doubtful any lame-duck deal would bind the Finance and Appropriations committees to much of anything.
Any deficit-reduction proposal produced by the Finance and Appropriations committees next year would have to include significant increases in tax revenue, Democrats insist. Democratic leaders also want a framework for future deficit reduction to include guarantees of the “progressivity” of future tax reform.
Democrats have criticized tax reform proposals from House Budget Committee Chairman Paul RyanPaul RyanRNC chairman: Ryan one of 'brightest stars' in Republican Party Gingrich: 'Of course' we can afford to have president with split personality Could a President Clinton heal a divided nation? MORE (R-Wis.) and Sen. Pat Toomey (R-Pa.) for allegedly shifting the tax burden onto the middle class. While the Ryan and Toomey plans have been vague about what tax deductions would be eliminated to overhaul individual and corporate tax brackets, Democrats say those plans do not add up unless middle-class earners lose popular tax breaks.
“I do think there is a chance of a framework agreement in the lame-duck session, with the details to be worked out by the committees of jurisdiction in the early months of next year,” said Conrad. “With any framework agreement, there should be a down payment.
“I don’t think anyone should give up on a framework agreement being reached in the lame duck,” he said.
Conrad said members of the Gang of Eight had agreed to a framework earlier, but it has to be finalized.
“A lot of things happened since, so that has to be adjusted,” he said.