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Lame Duck Likely to Feature Can-Kicking

Congress Expected to Punt on Bush-Era Tax Rates, Pending Spending Cuts

Amid all the bluster about how high the stakes are and the vows by both parties to play out the game of chicken until they win, the approaching lame-duck session is more likely to come down to what lame ducks almost always come down to: punting until the next session of Congress.

It has long been clear that Congress and the White House are leaving until after the elections the big questions about the renewal of Bush-era tax rates and whether to roll back pending spending cuts.

While both sides seem to believe an electoral victory for their party will force the other to capitulate, those dynamics have rarely played out in lame-duck sessions of the past, and Congress as a whole has been more apt to defer to the next duly elected Congress on long-term decisions for the country’s fiscal policy. Indeed, outside budget experts said there is some reason for optimism on a short-term agreement after the elections, but not much more.

“Both parties are engaged in a game of three-dimensional chess,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The rules of the game will not change too much regardless of who wins the presidency and has control of the Senate in January, she said, because the outlines have already been established and the action must occur before the winners take office. But the agreement is likely to “move slightly” in the direction of the elections’ winners, she said.

Former Senate aides agreed there will be neither the time nor the incentive to tackle the larger budget questions.

Former Senate aides said the odds of a lame-duck agreement depend on how quickly the electoral losers capitulate.

“I could easily see Members looking for a very short-term solution regardless of how the election turns out,” said Steven Duffield, a former Senate GOP leadership aide.

In that case, one could foresee a stopgap deal to extend the current tax rates and stall budget cuts under sequestration, paired with a process agreement to direct the House Ways and Means and Senate Finance committees to rewrite the tax code in the 113th Congress. That scenario would be best for staffers trying to make Christmas travel plans, but maybe not for the deficit reduction effort.

MacGuineas said any plan would need to be “credible” because of the poor track record that Congress has had.

William Hoagland, a former budget adviser to then-Senate Majority Leader Bill Frist (R-Tenn.) and longtime expert on fiscal policy, predicted that both parties will agree to avoid the tax rate increases and budget cuts, which has been called the “fiscal cliff,” but that it will not come without pain.

“I think this will go right up to Christmas Eve,” Hoagland said. “Might be New Year’s Eve.”

Hoagland and other budget observers also stressed that beyond the spending reductions and marginal tax rates, lawmakers also face what have become regular standoffs over relief for the middle class – including rejiggering the alternative minimum tax and preventing a slash in payments to doctors for treating Medicare patients.

In campaign mode, House Republicans have been content to blame Senate Democrats for inaction on the tax and spending issues. Speaker John Boehner (R-Ohio) echoed that sentiment speaking at an event sponsored by the Christian Science Monitor during the Republican National Convention in Tampa, Fla.

“The House passed an extension of all the current tax rates for one year so that we’ve got time to do real tax reform next year. The House has done its work,” Boehner said. “It’s sitting over in the Senate.”

Senate Democrats passed a tax bill to extend the current rates for families making up to $250,000 a year. The Democrats said allowing the lower tax rates for upper income levels to expire is key to a “balanced approach” to the deficit reduction plan. The House has rejected that idea.

Current and former aides said that question may be the one most likely resolved by the elections’ victors. However, Democratic Senatorial Campaign Committee Chairwoman Patty Murray (Wash.) has said that Democrats are prepared to let everyone’s taxes go up if Republicans insist on preserving lower tax rates for the rich. The ultimate question may be whether President Barack Obama is prepared to do so.

Some Republicans said privately that they wonder whether Obama would actually veto a stopgap agreement that extends all of the George W. Bush-era tax rates, particularly if he loses re-election and Mitt Romney is in a position to revive them.

But Murray’s point has been that allowing Bush-era tax rates to expire would allow lawmakers to start with a clean slate in the 113th Congress. Both the House and Senate would be debating a tax cut package, instead of fighting over whose rates would go up, Murray has said. That rationale may appeal to Democrats even during a lame duck in which they are licking their wounds from an electoral drubbing – especially if they think it might put them in a better minority negotiating position come 2013.

The fight over taxes, however, is unlikely to be divorced from the efforts to make sequestration less painful on the military and other domestic programs. That could mean a deal will develop in which one side gives on taxes in order to secure the spending deal it wants, or vice versa.

Republicans have attempted to blame Obama for the automatic spending cuts required by sequestration, even though many of them voted for the deal to raise the debt limit last August that set up the arrangement when the super committee could not reach an agreement.

Boehner wants the Senate to move a bill to replace the sequester cuts. The House passed a version in May.

“At some point, things like regular order matter. And I think it’s time for the Senate to move a bill, and hopefully we can resolve this before the end of the year,” he said.

Boehner’s prognosticating may prove correct, but if the deal comes on New Year’s Eve, it would seem to ensure that another of Boehner’s predictions is proved accurate.

“Congress has been America’s favorite whipping boy for 200 years, and I don’t think that’s going to change anytime soon,” he said.

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