Politico: Fiscal framework emerging

Politico's Jim VandeHei and Mike Allen report that "top officials" involved in negotiations over the so-called fiscal cliff and grand bargain are saying "the countours of a deal" are beginning to emerge. VandeHei and Allen say these anonymous insiders are telling them that there are three big elements to the deal:

• $1.2 trillion in tax hikes'halfway between the $1.6 trillion sought by the president and the $800 billion that "Republicans say they could stomach."
• $1.2 trillion in spending cuts to replace the sequester's automatic cuts
• At least $400 billion in entitlement cuts, primarily to Medicare'including means testing and raising the retirement age starting in 10 to 20 years. (The report doesn't say whether these would be part of the $1.2 trillion in spending cuts.)

Broadly speaking, it isn't surprising that a fiscal deal would revolve around revenue and spending. If it didn't, then it wouldn't be a fiscal deal. And while most of the article appears to be the result of background conversations, the few detailed quotes VandeHei and Allen were able to report seem to undercut the notion that specific elements of the framework have been settled.

For example, based on the following quote from a Democratic official, it's hard to imagine an issue like raising the Medicare retirement age has been settled:

A top Democratic official said talks have stalled on this question since Obama and congressional leaders had their friendly looking post-election session at the White House. 'Republicans want the president to own the whole offer upfront, on both the entitlement and the revenue side, and that's not going to happen because the president is not going to negotiate with himself,' the official said. 'There's a standoff, and the staff hasn't gotten anywhere. Rob Nabors [the White House negotiator], has been saying: 'This is what we want on revenues on the down payment. What's you guys' ask on the entitlement side?' And they keep looking back at us and saying: 'We want you to come up with that and pitch us.' That's not going to happen.'

Assuming that's accurate, then (a) the Obama team is taking the right negotiating posture and (b) it seems like putting a number on Medicare cuts or describing the form in which those cuts would come is pure speculation (or, perhaps, wishful thinking, given the Beltway's preoccupation with cutting Medicare).

The other area where Republicans haven't shown forward progress is on taxes and according to the report, the president isn't willing to simply take John Boehner's word when it comes to raising revenue: at a minimum, he wants to see the upper-income tax cuts expire, thereby locking in one of his key priorities.

Officials familiar with the White House position say Obama plans zero flexibility on his insistence on a higher tax rate for top earners. He plans to take what one aide called a 'trust but verify' position: He will insist on a higher rate in the year-end deal. Then next year, during tax-reform negotiations, 'the onus will be on Republicans to propose something that raises the same amount of revenue,' the aide said. 'He's going to pocket their rate hike on the top two brackets at first, and then he's going to say to them in the 2013 process that we set up: If you think you can realize these same revenues in a different way, prove it to me.'

The thing that VandeHei and Allen don't explicitly mention is that a key part of the deal here is that middle-class tax cuts would need to be extended. Boehner may be bluffing, but yesterday he unambiguously rejected extending tax cuts on income below $250,000 without also extending tax cuts on income above $250,000. Unless he's willing to let enough Republicans join with Democrats in passing the middle-class tax cut extension, no fiscal deal will be possible. And no matter what he says in private, until Boehner relents in public'and backs up his words with legislative action'it's hard to say that any sort of deal is imminent or emerging.

VandeHei and Allen also repeatedly say that whatever deal is ultimately made, the only two people that will matter will be President Obama and John Boehner. (For example: "Everyone has an opinion on the grand bargain. But only two matter: Obama's and Boehner's.")

The president doesn't seem to agree with that, however. Yesterday, for example, he asked the public to weigh in and put pressure on the GOP to extend middle-class tax cuts. Clearly, the president understands that he cannot simply sit down in a room with Boehner and sweet talk the GOP out of holding those tax cuts hostage. For that to happen, Boehner's caucus is going to need to feel some heat from voters. So while Obama and Boehner might be the last two individuals to sign off on whatever deal ultimately emerges, this isn't simply an inside game. Obama already knows that and if Boehner hasn't yet figured it out, it won't be long before he does.