Fiscal cliff deal taking shape?

Can Congress reach a deal to avoid the consequences of the “fiscal cliff”?  So far the prospects have looked rather dim.  National Journal’s Dan Friedman has a more optimistic take — but it depends on Republicans trading top tax rates for tax and entitlement reform:

Top staffers are working on a fiscal cliff deal after leading Democrats emerged encouraged from a Friday White House meeting in which Republican leaders did not explicitly reject the suggestion they accept a Senate-passed bill that would allow tax rates to rise on top earners, leadership aides said.

Democrats hope their bill, which would need to pass only the House, can serve as a “down payment” this year in a deal that would include agreement on a mechanism to enact tax and entitlement reforms next year.

“The real development from our standpoint is that we said we are absolutely clear that we are sticking to our position that the Senate bill is what is [going to] happen between now and Dec. 25th,” the Democratic aide said. “Notably, Republicans didn’t shoot that down.”

Republicans replied that there are a lot of things they didn’t shoot down along with tax increases on the top brackets:

Senate Minority Leader Mitch McConnell, R-Ky. spokesman Don Stewart mocked the suggestion GOP leaders’ silence on Democrats’ suggestion is significant. “We didn’t rule out unicorns,” Stewart said. “We didn’t rule out building a cheese factory on the moon and Democrats didn’t rule out abolishing the EPA.”

Still, rather than flatly rejecting Democrats’ suggestion, GOP leaders said that their staffs would work in the coming week on binding proposals to reform the tax code and get savings from entitlement programs, staffers said.

Yes … but. The election has probably taken the wind out of the sails from the GOP drive to lock in all of the current tax rates.  Had Obama lost, or had control of the Senate shifted to the Republicans, that might not be the case.  With only one chamber under their control and the prospect of driving off the cliff in order to protect the top rates, it’s getting more likely that we’ll see a Republican horsetrade on those points in order to get commitments on entitlement and tax reform.

Those commitments had better be solid, though.  The sequestration that drove this process might be one way to ensure that Democrats follow through on an agreement, but this time the sequestration had better take a bigger bite out of Democratic priorities than the previous version did.  Boehner’s aide made that argument, which the Democrats didn’t dispute:

An aide to House Speaker John Boehner, R-Ohio, earlier Friday said the GOP’s goal for the coming weeks “is to settle on long-term revenue targets for tax reform as well as targets for savings from our entitlement programs.” With targets agreed on, “we can create simple mechanisms, in statute, that would achieve those revenue and spending goals,” the aide said. “They would be in place unless or until more thoughtful policies replace them.”

The Democratic leadership aide did not dispute that description, except to say it overlooks action to be taken in December. When considered along with Republicans’ muted reaction to Democrats’ proposal to pass the Senate tax bill, the aide argued the upshot of the meeting is the probability the GOP will accept, in December, an increase in taxes on top earners in exchange for agreement on binding tax and entitlement reform mechanisms next year.

In the current political line-up, that’s probably the best the GOP can do without playing chicken all the way to the cliff with Democrats.  If voters wanted a better deal, they would have replaced more of the players two weeks ago.

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