Obama, Senate return to D.C. to tackle budget, tax dilemma

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WASHINGTON -- With just five days left to make a deal, President Barack Obama and members of the Senate were set to return to Washington today with no clear path out of their fiscal morass, even as the Treasury Department warned that the government will soon be unable to pay its bills unless Congress acts.

Treasury Secretary Timothy F. Geithner, adding to the building tension over how to handle a year-end pileup of threatened tax increases and spending cuts, formally notified Congress on Wednesday that the government would hit its statutory borrowing limit Monday, raising anew the threat of a federal default as the two parties remained in a standoff.

For months, Mr. Obama, members of Congress of both parties and top economists have warned that the nation's fragile economy could be swept back into recession if the two parties did not come to a post-election compromise on January's combination of tax increases and across-the-board spending cuts.

Yet with days left before the fiscal punch lands, both sides are exhibiting little sense of urgency, and new public statements Wednesday appeared to be designed more to ensure that the other side is blamed rather than to foster progress toward a deal.

After a high-level phone conference call, House Republican leaders called upon the Senate to act but opened the door to bringing to the House floor any last-minute legislation the Senate could produce. "The House will take this action on whatever the Senate can pass, but the Senate first must act," said the statement issued on behalf of Speaker John A. Boehner, R-Ohio, and his three top lieutenants.

But Senate Majority Leader Harry Reid, D-Nev., instead called upon House Republicans to pass an existing Senate measure that would prevent tax increases on household income up to $250,000. "The Senate has already rejected House Republicans' Tea Party bills, and no further legislation can move through the Senate until Republicans drop their knee-jerk obstruction," he said in a statement.

Senators will return to the Capitol this evening with nothing yet to consider. The series of votes waiting for them are unrelated to the fiscal deadline. The House will be gaveled into session at 2 p.m., but since Mr. Boehner has not called the members back to Washington, it will most likely be gaveled back into recess shortly thereafter.

The shift to the Senate has focused new attention on Senate Minority Leader Mitch McConnell, R-Ky., a deal-making veteran. Democrats say they need assurances from Mr. McConnell that he will not use procedural tactics to delay any potential bill for an interim solution to avert the fiscal crisis.

But McConnell spokesman Don Stewart said no one from the White House or from Mr. Reid's office has reached out to begin negotiations. Democrats say Mr. McConnell knows full well what they are proposing: the same Senate bill that passed in July, extending all the expiring George W. Bush-era income tax cuts on incomes less than $250,000, setting the tax rate on dividends and capital gains at 20 percent, and stopping the alternative minimum tax from rising to hit more middle class taxpayers.

Onto that, Democrats would like to add an extension of expiring unemployment benefits and a delay in across-the-board spending cuts while negotiations on a broader deficit reduction plan slips into next year.

Democrats now suggest that Republicans are content to wait until after the January deadline. On Jan. 3, Mr. Boehner is likely to be re-elected speaker for the 113th Congress. After that roll call, he may feel less pressure from his right flank against a deal.

For its part, the Senate may simply be out of time. Without unanimous agreement, Mr. Reid would have to take procedural steps to begin considering a bill. He could then be forced to press for another vote to cut off debate before final passage. If forced to jump through those hoops, the 112th Congress could expire before final votes could be cast.

"I think there's some chance that we get a deal done in the early weeks of January, which technically means you're going over the cliff," Rep. Jim Himes, D-Conn., said Wednesday on CNBC.

Lawmakers from both parties say Mr. McConnell could be the key to a resolution. He has played the role of adjudicator for congressional Republicans before, during last year's fight over a payroll tax extension and the battle between Democrats and Republicans over how, or if, to pay for an emergency disaster financing bill.

With days to spare, Mr. McConnell must decide whether to allow on the Senate floor the Democrats' bill to extend expiring tax cuts. If passed without a filibuster, that legislation could force the House speaker's hand and quiet his raucous GOP conference. Or Mr. McConnell, who is up for re-election in 2014 and would like to avoid a primary fight, could stand back quietly and hope that Mr. Boehner and Mr. Obama somehow manage to put together a deal.

If Mr. McConnell cannot come to the rescue, there is another hope: Starbucks.

Howard Schultz, the company's chief executive officer, asked baristas who work in Washington-area Starbucks to scrawl "Come Together" on coffee cups to generate enthusiasm for a compromise.



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