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Despite Happy Talk, Slow Progress in Fiscal Cliff Talks Despite Happy Talk, Slow Progress in Fiscal Cliff Talks

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CONGRESS

Despite Happy Talk, Slow Progress in Fiscal Cliff Talks

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Senate Majority Leader Harry Reid of Nev., second from left, accompanied by, from left, House Minority Leader Nancy Pelosi of Calif., House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Ky., gestures as he speaks to reporters outside the White House following a meeting with President Barack Obama to discuss the economy and the deficit.(AP Photo/Jacquelyn Martin)

The Kumbaya rhetoric and photo-ops between President Obama and congressional leaders surrounding the so-called fiscal cliff are starting to wear thin.

Congress returned to Washington this week, confronted with a calendar that leaves roughly one month to strike a deal on a wide range of more than $500 billion in tax and spending issues. For all of the optimism surrounding the initial meetings between leaders, very little progress has been made, according to congressional staffers and lobbyists familiar with the negotiations.

“I think we are still trying to come together on something to present to the leaders and build around a framework that we can then fill in the details on,” says a senior House Republican aide.

The state of play now resembles a stand-off in an old black-and-white Western movie, with two cowboys looking for the other to make the first move. Republicans complain that the White House has not yet negotiated in good faith by failing to offer any details on the cuts to entitlement programs President Obama would accept. The president, meanwhile, has made it clear that he’s looking for additional revenue of as much as $1.6 trillion, money that he has said cannot just come from capping deductions.

All of this public posturing has only delayed any real work. Neither side, for instance, has privately discussed specific proposals on revenue: the priciest item from the fiscal cliff list, with roughly $400 billion in tax changes scheduled for 2013. Nor have Republicans and Democrats explored specific ideas on ways to raise revenue, or any larger revenue target for a final deal.

“There is no progress on understanding how you would raise the money,” says G. William Hoagland, a senior vice president at the Bipartisan Policy Center and former staff director for the Senate Budget Committee who still maintains close ties to the Hill.

So far, the discussions have merely reiterated well-worn positions: moves that Hoagland indicates that “things are not looking good as they’re coming back this week. Hopefully, it’s the dark portion before the storm.”

The White House has not scheduled any new meetings between the president and members of Congress. Instead, President Obama will spend the next few days meeting with business leaders and middle-class people who will be affected if Congress fails to extend the tax cuts for household income below $250,000. These post-election moves are meant to build on the support and leverage that the White House believes it gained from the election on the issue of raising tax rates.

Before cynics write off the negotiations entirely and pencil in Jan. 1 as the day the country goes over the cliff, former administration officials and Hill staffers say it makes sense to be patient for now. “I was happy about the rhetoric from the last meeting. Everyone realized that they needed a nice tone, and the markets responded nicely,” says Arshi Siddiqui, a partner at Akin Gump Strauss Hauer & Feld and former senior aide to House Speaker Nancy Pelosi. “There will be lots of up and downs before we get to a successful resolution.”

Others expressed optimism because now there is less pressure on Congress and the president to produce a grand budget deal in just a month. Instead, the conventional wisdom favors a two-step process with a down payment of revenues and spending cuts for the end-of-the-year, along with a framework for a larger deal in 2013.
“I’m optimistic that we’ll get a deal by the year end, but I do think the short period of time we have to negotiate that deal may mean that the deal is just a down payment and we’ll be back at this next year,” Michael Mundaca, the former assistant secretary for tax policy at the Treasury Department under President Obama.

Those in the optimist camp also point out that staffers do not have the leeway to get down to brass tacks and negotiate a deal on behalf of their bosses at this stage. Only the leaders can agree to the contours of a deal, which means that another series of meetings will indicate some progress.

There is also a sense among congressional staffers, lobbyists, and people close to the administration that the ongoing discussions of taxes and spending over the past few years—from the Biden talks to the debt ceiling to the super committee—mean that everyone understands clearly what is at stake and the pieces that will fuel a final deal.

“I don’t think the lack of progress now necessarily portends anything, in part, because, it is the same players from the Obama and Boehner negotiations from last summer,” says Robert Greenstein, President of the Center on Budget and Policy Priorities. “The fact that they had these prior negotiations in 2011 means that it will not take daily negotiations for the next 30 days to settle this.”

Still, none of this “happy talk,” as Democratic Senate Majority Leader Harry Reid has called it, can appease the growing concern about finding a compromise in time to avert the fiscal cliff. The two parties’ views, while well-known, remain very far apart. Both sides feel like they gained some leverage from the election, with President Obama retaining the White House and the Republicans keeping the House., and this means that both sides are less willing to budge.

“Everyone is looking for this magic bullet that shows you how to raise revenue without raising rates or cut entitlement programs without cutting benefits. Guess what? There is no magic bullet. Everything will be hard,” says Pete Davis, an advisor to Wall Street money managers and former economist for the Joint Committee on Taxation and the Senate Budget Committee.

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