Tax writers huddle with Bernanke, budget officials on 'fiscal cliff'

Tax-writing senators are privately discussing how to deal with the looming "fiscal cliff" with a string of key government officials on Wednesday.

Members of the Senate Finance Committee have already met with Doug Elmendorf, the head of the Congressional Budget Office (CBO), and have afternoon meetings scheduled with Federal Reserve Chairman Ben Bernanke and Tom Barthold, the chief of staff for the Joint Committee on Taxation.

Finance members told The Hill after the meeting with Elmendorf that they did not present a specific fiscal plan for the CBO head to score, and Sen. Kent Conrad (D-N.D.) said that the meeting centered on the economic consequences of various approaches to dealing with the cliff.

But Sen. Max Baucus (D-Mont.), the panel’s chairman, did say that he had already handed some proposals over to Elmendorf, with the economy poised to hit the fiscal cliff in less than four months. 

“I personally have given him some proposals to look at,” Baucus said. 

Baucus said he has given proposals to both the Congressional Budget Office and Joint Committee on Taxation.

The meetings Wednesday are just part of a flurry of action on year-end fiscal issues, as both the House and the Senate prepare to leave town this week to campaign full-time through the November election. 

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Elmendorf and Bernanke are just some of the analysts who have said that the expiration of Bush-era tax rates and the automatic spending cuts known as sequestration could be a huge drag on the economy, with Elmendorf forecasting that they would send the U.S. back into recession. 

Republicans and Democrats  have been sparring for months over fiscal-cliff issues, including whether to extend all current tax rates, as Republicans want, or let them rise for the highest earners.

Baucus stressed that the meetings are “not political.”

“Members of the committee are talking and hearing each other talking, so you can develop trust. Because 80 to 90 percent of the resolution to the fiscal cliff is going to be in the Finance Committee, because it is all about entitlements and revenue,” Baucus said.

A Democratic aide later clarified that while "ideas" are being discussed, no concrete proposals are yet ready from Finance. 

Baucus also said that panel members wanted to find out from Bernanke how the central bank’s latest round of bond-buying would affect projections on the fiscal cliff’s impact. 

The Fed announced last week that it was embarking on a third round of "quantitative easing," buying up $40 billion of bonds each month in a bid to lower borrowing rates and spur economic activity. The agency added that it was committed to those purchases until it was satisfied with improvement in the labor market.

Bernanke has been warning lawmakers for months about the need to avert the "fiscal cliff,” a term he coined in congressional testimony back in February. The country’s top central banker has repeatedly insisted that if Congress does anything to help the economy, it should avert the cliff.

"If the fiscal cliff isn't addressed, as I've said, I don't think our tools are strong enough to offset the effects of a major fiscal shock," he told reporters earlier this month. "It's really important for the fiscal policymakers to, you know, work together to try and find a solution for that."

On the House side, Democratic and Republican members of the tax-writing Ways and Means Committee are scheduled to sit down on Thursday to discuss the cliff. Rep. Dave Camp (R-Mich.) also met with Treasury Secretary Timothy Geithner on Wednesday, something Camp’s office says happens periodically. 

Geithner was later seen walking out of the office of House Speaker John Boehner (R-Ohio). Asked by The Hill what was discussed, Geithner declined to say.

A spokesman for Boehner said Geithner came to brief the Speaker on the European debt crisis, adding that he does so every few months. He declined to say whether the two discussed the approaching “fiscal cliff” of expiring tax cuts and automatic spending cuts that are set to take effect at the beginning of the year, and that many fear could drive the nation back into recession.

— This story was last updated at 3:22 p.m.

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