-President, House Speaker Are Critical To Budget Agreement
-Conservative Republicans Pressure Boehner To Hang Tough On Revenues
-Liberal Democrats Tell Obama Not To Accept Entitlement Overhaul

By John Shaw

WASHINGTON (MNI) – It’s been widely assumed in Washington that,
left to their own devices, President Obama and House Speaker John
Boehner could negotiate a sweeping deficit reduction agreement that
would be good for the country.

But both leaders face a large practical barrier as they resume
budget negotiations Friday: the rank-and-file members of their parties.

Obama will host Boehner, Senate Majority Leader Harry Reid, Senate
Minority Leader Mitch McConnell and House Minority Leader Nancy Pelosi
in budget talks that begin Friday morning at 10:15 a.m. ET.

Most analysts say they expect all of the leaders to express hope
and confidence as they begin the deliberations, but many will be closely
looking to see if they create a process to narrow the issues and a hard
deadline to achieve a result — apart from the already hard deadlines
created by the fiscal cliff itself.

Since the day after the election, Boehner has signalled that he is
open to “new revenues” but has insisted they must come from tax reform
and the closing of unspecified tax loopholes.

The Speaker is under intense pressure from conservative House
Republicans not to relent on a key issue that has become a matter of
political honor for the GOP: not raising marginal tax rates.

Boehner’s handling of the revenue question will be key in the
budget talks.

For Obama, rank-and-file Democrats are insisting that the president
not make concessions that would substantially change key entitlements
such as Medicare, Medicaid and Social Security.

In a letter that is circulating among Senate Democrats and could be
sent to Obama soon, the senators tell the president what must be in a
sound budget agreement.

It should have a “jobs component,” include “significant revenues,”
specifically acknowledge that nearly $1 trillion in discretionary cuts
that were part of the 2011 debt ceiling agreement, reduce income
inequality and be reached “in the light of day.”

They add another condition: “Any deal must protect Medicaid,
Medicare and Social Security from harmful cuts,” adding, “each of these
programs is a vital lifeline to the middle class.”

Republicans have said that they will make no concessions on taxes
unless Democrats relent on “structural” entitlement reform.

Before meeting with congressional leaders, the president conferred
Tuesday with labor leaders and Wednesday with a group of business
executives.

Since the election, both Obama and Boehner have sent conciliatory
signals, but have not tipped their hands about what a final budget
accord may look like.

The president repeated his insistence that any deficit reduction
package be “balanced” with both spending cuts and revenue increases.

“We can’t just cut our way to prosperity,” Obama said, arguing that
tax increases for the wealthy must be part of a final agreement.

But the president also struck a conciliatory note. “I’m open to
compromise. I’m open to new ideas,” he said.

Boehner said it’s essential for Congress and Obama to find a way to
avert the fiscal cliff. He repeated that he opposes increasing tax rates
as part of a deficit reduction package, adding he is waiting for new
proposals from the president.

The Speaker said he is open to new revenues as long as they are
generated by tax reform which spurs economic growth or closing unneeded
tax loopholes. He said that tax reform and entitlement reform are
critical to a long-term deficit reduction agreement that should be
reached next year.

Boehner has said that Congress should pass a “down payment” on
deficit reduction this year, but declined to say how large a package he
would like to pass and how this package would relate to efforts to avert
the fiscal cliff.

** MNI Washington Bureau: (202) 371-2121 **

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