-President, Congressional Leaders Strike Positive Tone, See Path Ahead
-Weeks Of Tough Talks Loom; Obama, Boehner Not Likely To Rush Deal

By John Shaw

WASHINGTON (MNI) – Anyone who has watched an occasional boxing match can
easily see parallels in the early stages of President Barack Obama’s budget
talks with congressional leaders.

The combatants have touched gloves and have begun to confidently but warily
circle each other. Very shortly, they will step forward and engage.

Put more concretely, Obama met Friday with House Speaker John Boehner,
Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, and
House Minority Leader Nancy Pelosi for more than an hour in the White House and
all emerged from the meeting calling it constructive.

“I believe that we can do this and avert this fiscal cliff,” Boehner told
reporters outside of the White House following the meeting.

Pelosi, standing next to Boehner and her other congressional colleagues,
agreed: “I feel confident that a solution may be in sight.”

Reid added, “This isn’t something we’re going to wait until the last day of
December to get done. We have a plan. We’re going to move forward on it.”

It’s not exactly clear what Reid meant when he said “we have a plan,” but
congressional staffers say last week’s talks appear to have pushed the President
and congressional leaders toward a two-step approach.

First, they will try to reach a framework agreement in the coming weeks in
which the two parties agree on long-term revenue and spending levels as well as
a specific deficit reduction down payment that could be passed in the lame duck
session of Congress.

Senate Budget Committee Chair Kent Conrad has suggested a down payment of
$400 billion would be appropriate. Others have said a smaller down payment might
be acceptable, perhaps in the $50 to $100 billion range.

Congress’s key tax and spending committees would then craft detailed
legislation to secure the spending and revenue goals already agreed to. This
would include work on comprehensive tax reform.

Integral to this two-step process would be the creation of a fail safe
process or special procedure that would go into effect if Congress does not
produce the agreed spending savings and revenues.

This accord, if reached, would replace the fiscal cliff deadlines.

While there are hundreds of details to work out and major decisions to be
made, the talks will hinge on how the Democratic demand for more revenue and the
Republican insistence on entitlement reform are reconciled and integrated.

“We’re prepared to put revenue on the table as long as we solve the
real problem,” McConnell said Friday, adding that “most of my members
without exception believe that we’re in the dilemma we’re in not because
we tax too little but because we spend too much.”

McConnell and Boehner have signaled they will demand structural changes to
key entitlement programs such as Social Security, Medicare and Medicaid.

“We fully understand that you cannot save the country until you have
entitlement programs that fit the demographics of a changing America,” McConnell
said.

Pelosi has said “structural changes” can not be a code word for dismantling
these programs while Reid has said the talks should not even consider Social
Security.

This week staffers for Obama and congressional leaders will begin to
explore how the two-step process would work and what the overall deficit
reduction framework agreement might be.

The administration’s technical team will be led by Treasury Secretary Tim
Geithner, White House chief of staff Jack Lew and National Economic Council
director Gene Sperling.

Congressional leaders are expected to meet again with the President next
week, after the Thanksgiving recess and after he returns from his Asian tour.

The next session and those that follow are likely to be more contentious as
general concepts are turned into specific legislative language.

Obama and Boehner also appear to have a political imperative not to rush
into an agreement but spend at least several weeks trying to get the best
agreement for their party that they can. But the deadline is looming.

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

–email: jshaw@mni-news.com

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