OVERNIGHT DEFENSE: Congress comes back to work, faces packed schedule

Lawmakers are still in the position of having to hammer out a bipartisan deal to avoid nearly $1.2 trillion in across-the-board budget cuts, half of which will come from the Pentagon's coffers. Democrats remain adamant any deal must include tax increases. Republicans have taken a hard line against increases, claiming savings can be had by deeper cuts to social welfare programs.

But in the wake of the President Obama's election victory, congressional Republicans have begun to bend on that position, providing a little hope to those inside and outside the Beltway a deal can be struck. Earlier this week, House Majority Leader John BoehnerJohn BoehnerLobbyists bounce back under Trump Business groups silent on Trump's Ex-Im nominee Chaffetz won't run for reelection MORE (R-Ohio) indicated his party would be willing to consider certain "revenue increases" to avoid sequestration from happening. 

But, as with most things in Washington, there are caveats. In this case, BoehnerJohn BoehnerLobbyists bounce back under Trump Business groups silent on Trump's Ex-Im nominee Chaffetz won't run for reelection MORE said GOP members would not stand for tax increases on individuals at the top of the tax bracket — a demographic on which the Obama administration has vowed to target its proposed increases. 

With Republicans still in control of the House and Democrats still controlling the Senate, there is still some major horse trading to be done before a deal can become reality. However, lawmakers still have a bevy of pressing legislative issues aside from sequestration they will have to put to bed before calling the 112th history. 

Benghazi, Petraeus hot topics, too: The bombshell resignation of CIA Director David Petraeus is sure to be topic No. 1 among lawmakers as they return to Washington. They’re also quickly digging their hands — and committees — into the probe.

Senate Intelligence Committee Chairwoman Dianne FeinsteinDianne FeinsteinTrump, lower court nominees need American Bar Association review This week: Congress returns to government shutdown fight Hotel industry details plans to fight Airbnb MORE (D-Calif.) says her panel will investigate the FBI’s discovery of the Petraeus affair. She criticized the FBI on Monday for not alerting Congress and the White House sooner that the CIA director was being investigating.

The House Intelligence Committee is bringing Deputy FBI Director Sean Joyce and new acting CIA Director Michael Morell to brief on the Petraeus investigation Wednesday. The committee has not yet decided if it will investigate the Petraeus probe.

Of course, Petraeus was supposed to be testifying at the high-profile hearings on Benghazi Thursday. Now, Morell will be coming to Capitol Hill for the CIA instead.

Defense authorization looks to come off the bench: As Congress returns, so do the calls for the Senate to bring the long-stalled defense authorization bill to the floor.

The bill passed the Armed Services Committee in May but has remained in limbo since, even as it enjoys rare bipartisan, bicameral support in Congress.

The bill is not expected to be brought up before Thanksgiving, but Senate leaders are hopeful that it can get done during the lame-duck fiscal-cliff deliberations, then passed through conference committee.

There is a back-up plan if that can’t happen, however, so that this committee is not the one that breaks the defense bill’s 50-year passage streak: the committee is considering bypassing the Senate floor and taking the authorization bill straight to an informal conference committee, where it could then return a final bill to the Senate for passage. Defense sources say this plan is not the preferred one for anyone involved, but it would be used as a last resort to make sure the defense authorization passes again this year.

Moody’s says Obama win negative for defense industry: Moody’s says President Obama’s victory is bad for business if you’re in the defense industry.

A new Moody’s Investor Service report rates Obama’s win as “credit negative” for defense companies. The report notes the near $500 billion in Pentagon cuts under the 2011 Budget Control Act — which Mitt Romney had said he’d try to roll back — and said that even had Romney not succeeded in his plans to boost defense, “a Republican victory in Tuesday’s presidential election would have been a decidedly more positive outcome for military contractors.”

As for the sequestration cuts, the report notes that “fear of pushing the U.S. back into recession may well prove enough for Congress to accomplish something when it reconvenes on Tuesday” for the lame-duck session.

Moody’s concludes that while sequestration will likely be “legislated away” in the short term, “more far-reaching cuts in US defense spending will eventually come to pass.”

Nominations pending: With so much up in the air on Capitol Hill, from the growing Petraeus scandal to the looming fiscal cliff, there's not much on the legislative agenda in the second half of the 112th Congress. But as far as guarantees go, Senate approval for the White House's picks for the the Pentagon's new top commanders in Europe and Afghanistan should be a lock. 

Marine Corps Gens. John Allen and Joseph Dunford go before the Senate Armed Services Committee on Thursday to become the new head of European command and the top U.S. officer in Afghanistan, respectively. 

Dunford, who is currently assistant commandant of the Marine Corps, is the administration's pick to replace Allen as the commander of American troops in Afghanistan. 

Allen has been nominated to take the helm of U.S. Forces-Europe and become the next Supreme Allied Commander for NATO. 

Both nominations were at the top of Defense Secretary Leon Panetta's priority list for Congress, laid out in October. If confirmed, Dunford will likely oversee the White House's plan to pull all U.S. forces from Afghanistan by 2014. 


— Panetta applauds Petraeus's decision to step down 

— CIA resignation could fuel GOP attacks on Benghazi 

— U.S. open to UN probe of drone strikes 

— Iran claims Turkey backing al Qaeda on Syria border 

— Second shooter suspected in Afghan massacre

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