Vice President Joe Biden and Speaker John Boehner greeted one another on Friday before the counting of Electoral College votes.

Susan Walsh, Associated Press

Grand bargain: Back on the table in Congress?

  • Article by: ZACHARY A. GOLDFARB
  • Washington Post
  • January 5, 2013 - 7:22 AM

WASHINGTON - The White House is eyeing a return to the "grand bargain" it tried to reach late last year with House Speaker John Boehner, R-Ohio, as perhaps the best hope of defusing a fresh threat to the U.S. economy in just two months, according to people familiar with the discussions.

As planning begins for the next phase of Washington's fiscal wars, attention is turning to a strategy for avoiding deep automatic cuts to domestic and defense spending and averting a government default -- which could all hit at the same time.

Democratic and Republican officials say they could build on the grand bargain talks, which looked at raising new revenue through an overhaul of the tax code and reducing spending, including on Medicare, Social Security and other entitlement programs.

As in the earlier negotiations, however, there remain sticking points. How much new tax revenue would Republicans accept, especially now that tax rates on the wealthy are already climbing under the fiscal cliff agreement? And how far will President Obama go in meeting the GOP demand for deep spending cuts?

Obama and Boehner came close last month to a broad deal aimed at stabilizing the federal debt. But the speaker abandoned the talks, saying that the White House offer was too light on spending cuts. Instead, Democrats and Republicans reached a far more modest deal to avoid the fiscal cliff.

Republicans say they now have a stronger hand because of the government's need to increase its $16.4 trillion borrowing limit. The government hit the debt ceiling this week, and the Treasury Department warns it will be unable to pay its bills in about two months unless it can borrow more. Congressional Republicans say they will not vote to raise the debt ceiling unless there is a deal to make spending cuts.

'The devil is in the details'

The White House insists that the government must meet its obligations, and thus raising the debt ceiling is non-negotiable. Some Democrats, however, say that the bargaining advantage has shifted toward the GOP.

White House officials still believe that the framework previously discussed by Obama and Boehner offers ample scope for a deal to avoid the automatic spending cuts, known as a sequester, sources said. Such a deal, they say, could yield legislation that would also raise the debt ceiling.

Privately, some Republicans are not opposed to the approach. The GOP is "generally open to the framework, but the devil is in the details," said one Republican leadership aide.

Still, the GOP plans to press its case that the time to discuss increasing taxes is over and the focus now must be on cutting spending. At a closed-door meeting Friday, Boehner told House Republicans that any increase in the debt limit must be accompanied by spending cuts and reforms of a greater amount, said a person in the room.

During the negotiations between Obama and Boehner, the president offered about $900 billion in spending cuts, including $600 billion to entitlement programs such as Medicare. Obama says tax revenues must be further increased in exchange for spending cuts. The bill approved by Congress this week raised slightly more than $600 billion of revenue over 10 years by raising tax rates. Obama now wants to raise about $600 billion more by limiting tax breaks.

'The next flash points'

The discussion of a new grand bargain would center on replacing the sequester, which is set to slice domestic and military spending by $1.2 trillion over a decade. "He's willing to have negotiations on further long-term deficit reduction and he's willing to do that in a balanced way," said Rep. Chris Van Hollen, D-Md.

Republicans, however, say they will put the debt limit at the center of negotiations and are willing to shut down the federal government in March, when a resolution funding it expires.

"The coming deadlines will be the next flash points in our ongoing fight to bring fiscal sanity to Washington," Sen. John Cornyn, R-Tex., said Friday. "It may be necessary to partially shut down the government in order to secure the long-term fiscal well-being of our country."

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