Fiscal cliff fix comes down to its designers: Reid, McConnell

By Karoun Demirjian

Friday, Dec. 28, 2012 | 4:02 p.m.

WASHINGTON ­— For the last four weeks, coming up with a deal to avoid the fiscal cliff has been the purview of the No. 1 Democrat and Republican in town, President Barack Obama and House Speaker John Boehner.

But since they came up empty, it will be up to their No. 2 guys — Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell — to strike an accord in the barely four days that remain before the end-of-year deadline when rising tax rates and scheduled spending cuts are set to cause a $600 billion economic crunch.

“We had a constructive meeting today, and Sens. Reid and McConnell are discussing a potential agreement,” Obama said Friday afternoon, shortly after hosting Reid, McConnell, Boehner and House Democratic Leader Nancy Pelosi for a last-minute White House summit on the fiscal cliff. “I’m optimistic we may still be able to reach an agreement that can pass both houses in time.”

But everyone in Washington, starting with the president, is couching that sort of optimism in a good deal of contingency planning.

The marching orders are this: Reid and McConnell will hunker down for the next 24 hours or so, with the task of hashing out as complete a plan as they can to extend some tax rate levels, avoid an interruption in unemployment benefits, delay the onset of sequestration cuts, extend the government’s borrowing authority and offset the cost of all that with some combination of spending cuts or cost reducers.

No one is expecting that they will be able to do all of that.

“I still want to get this done … but the hour for immediate action is here. It is now,” Obama said. “We’re now at the last minute ... let’s not miss this deadline.”

If Reid and McConnell aren’t able to come up with a recipe to solve the fiscal cliff, the president added, he wants Reid to put a “basic package” of measures “that makes sure taxes on middle class families don’t go up” and extends unemployment benefits without making spending cuts on the Senate floor for an up-or-down vote. Reid said Friday that he would prepare such a back-up bill so that it would be ready for a vote by New Year’s Eve.

“That’s the way this is supposed to work. If you can get a majority in the House, a majority in the Senate, we should be able to pass a bill,” Obama said.

It sounds simple. But even the president’s back-up plan will depend entirely on how well old political frenemies Reid and McConnell are able to work out their differences on a host of deep-seated disagreements in a matter of days.

In a way, it’s fitting that in the final hours, the fiscal cliff crisis should come down to Reid and McConnell, as they were the ones who divined it in the first place.

The fiscal cliff is the perfect storm of two basic events, both scheduled to take place Jan. 1: Rising tax rates and across-the-board budget cuts, that together could kick the economy back into a mini-recession over the next several months. The fiscal cliff is complicated by the nearly concurrent deadline on the debt limit: According to the U.S. Treasury, Congress must increase the national borrowing authority if the country is to be able to meet its debts after Dec. 31.

All of those elements have the mark of Reid and McConnell.

McConnell and Reid struck the agreement two years ago — when Boehner was still lowly leader of the minority — to extend tax rates at Bush-era tax cut levels for two years, and have them expire at the end of 2012.

In mid-2011, it was Reid’s idea to have across-the-board government cuts, known as sequestration, hit at the same time, if a “super committee” of lawmakers appointed under a deal to avoid hitting the national debt limit couldn’t come up with a list of spending cuts by their Thanksgiving 2011 deadline.

And it was McConnell, under the same deal, who divined the system under which Obama would be given his increased borrowing authority, up to the limit we are about to hit at year’s end.

After their meeting with Obama and other congressional leaders Friday, McConnell and Reid were sounding cautiously optimistic that they would be able to shake hands on something by Sunday afternoon, which is when both senators and House members are expected to return to Washington to discuss the details of their anticipated agreement and determine whether votes will be held.

McConnell said he is “hopeful and optimistic” and said he and Reid would be “working hard to try and see if we can get there (to a deal) in the next 24 hours.”

Reid also said that he was “going to do everything that I can” and expressed confidence that McConnell would as well. But he also warned lawmakers that they should keep expectations low.

“Whatever we come up with is going to be imperfect. Some people aren’t going to like it, some people are going to like it less, but that’s where we are,” Reid said. “We’re going to do the best we can.”

It is, nonetheless, a different tone from Reid, who for the past several weeks has insisted that the only way to avoid the fiscal cliff is if Republicans in the House hold a vote on the Senate’s bill to extend cut tax rates up to $250,000, but allow them to rise on income levels above that.

The Senate passed a bill to do just that on a simple majority vote in July. But McConnell has argued that the only reason he ever agreed not to filibuster that bill is that it is constitutionally null and void — all bills to raise revenue, such as a tax bill, must originate in the House, and the Senate’s $250,000 measure did not.

It is unlikely, given that history, that McConnell would readily agree to withhold the threat to filibuster the president’s back-up plan, which basically amounts to exactly what Reid had been demanding in a more constitutionally-appropriate vehicle, plus an extension of emergency unemployment benefits.

Boehner agreed to consider any bill the Senate sends over “either by accepting or amending,” so long as the Senate presents it as an amendment to House-passed legislation.

According to an aide for Boehner, congressional leaders and the president agreed Friday “that the next step should be the Senate taking bipartisan action.”