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Voters Will Likely Resolve Fiscal Cliff

While voters may think they’ll be casting their vote on Nov. 6 for Mitt Romney or Barack Obama, lawmakers are starting to acknowledge that the electorate will also decide how Congress should resolve the fiscal cliff.

While leaders still bluster publicly about holding the line during the lame-duck session even if they lose, they are increasingly eyeing the elections as the clarifying event to break the logjam over taxes and spending that has blocked a bipartisan debt deal for the past two years.

Democrats for months have been ratcheting up their resolve on the fiscal cliff and believe that Republicans will finally bend if President Barack Obama is elected. And they pointed to a quote from conservative Sen. Jim DeMint (R-S.C.) to that effect that appeared in a Bloomberg story last week.

“We might as well cut a deal,” DeMint said of what would happen if Obama wins. “If Republicans want to maintain the defense, we’re going to have to give tax increases to Obama.”

“When Jim DeMint is suddenly open to revenues, you know the tide is turning,” a grinning Sen. Charles Schumer (D-N.Y.) said Thursday.

Of course, DeMint’s office quickly walked back the quote.

“Senator DeMint strongly opposes tax hikes that destroy jobs. He was simply pointing out that President Obama won’t agree to anything that doesn’t include tax increases, which is one of the biggest reasons he should be defeated this November,” spokesman Wesley Denton said. “And that’s also why Senator DeMint opposes a lame-duck session. We shouldn’t have politicians cut deals for higher taxes after they’re kicked out of office. We need a new president and a new Congress address these issues next year.”

But DeMint isn’t alone in acknowledging the reality that Obama will be able to force through a tax increase.

Other Republicans, particularly in the Senate, have been meeting for months with Democratic counterparts in hopes of breaking the stalemate, although everyone has acknowledged that a deal simply isn’t going to happen until voters speak.

Schumer noted last week that on Wednesday alone he attended four meetings on the fiscal cliff, some of which were bipartisan. He said the discussions would continue while Congress is on recess for the next month and a half. Other Senators on the Finance Committee also held regular meetings to discuss the options, and the administration has opened talks with top Republicans, including a meeting last week between Treasury Secretary Tim Geithner and Ways and Means Chairman Dave Camp (R-Mich.).

Senators including John McCain (Ariz.), Lindsey Graham (S.C.) and Lamar Alexander (Tenn.) have openly expressed a willingness to consider new revenue as part of a year-end deal to block defense cuts and secure entitlement reforms.

And then there’s the simple math – the vast majority of the cliff comes from tax cuts and defense spending that are bigger Republican priorities than Democratic ones. It’s a trigger Democrats, such as Democratic Senatorial Campaign Committee Chairman Patty Murray (Wash.), have made clear they are ready and willing to pull.

But the House has largely remained implacable in public so far.

Speaker John Boehner (R-Ohio) told reporters Friday that he still would not support any tax hikes if Obama wins.

“No. … Our goal is to have tax reform and entitlement reform, and we all know that these are going to probably have to travel on parallel paths. But it’s important for our country to fix our debt problem and have a tax code that’s competitive in a worldwide economy,” he said.

However, he also expressed a desire to avoid the “ugly” sequester.

Rep. Kevin Brady (R-Texas), a deputy whip and senior member of the Ways and Means Committee, vowed that Republicans would not raise taxes. The current rates are set to expire if nothing is done, leaving the GOP seemingly little leverage in the fight. But Brady said the impact of the cliff on the economy would be the leverage against Democrats.

“I think the economy is the major leverage. It’s still going to be struggling in a major way,” Brady said.

Brady conceded the political winds would be against the GOP, saying “It’s true that it will be perceived as a referendum on higher taxes. But I think if the public retains Republicans in the House, it’s also a clear sign they don’t want to see taxes go up. Because we’re running on that same issue back home as well.”

He envisioned the two parties striking a deal to bring in increased revenue without raising rates.

“I think perhaps a common ground is that if the president wants to talk about new revenues from increased growth, energy development, or better tax code, there’s common ground there,” he said.

Still, there is some acknowledgement of the likelihood that the GOP will have to cave to Obama on the House side. Budget Committee member Rep. Tom Cole (R-Okla.) told the Washington Post last week that “if the president wins re-election, taxes are going up,” adding, “There’s not a lot we can do about that.”

There’s also the question of what would happen if Obama is defeated. Obama has so far vowed not to extend the Bush tax cuts for the wealthy under any scenario, but the pressure for at least some sort of extension could be enormous if Romney wins and Republicans dig in, lest his last few weeks in office see the biggest tax increase in history alongside layoff notices going out across the country in response to the sequester. Republicans would take over, their first order of business would be fixing the resulting mess, and Democrats would be stuck playing defense.

Some in the GOP wonder whether Obama would be willing to sign on to a one-year extension of the Bush-era tax cuts, as Boehner and Senate Minority Leader Mitch McConnell (R-Ky.) have proposed – similar to what he did in 2010 – alongside other items Obama would want on the way out the door.

It’s a question Democrats generally don’t want to talk about. But several aides told Roll Call that even though some Democratic Senators have floated the idea of an extension of all of the tax cuts, the vast majority of Democratic Senators plan to hang tough on taxes, particularly as part of any long-term deal.

Democrats simply aren’t going to sign on to a big debt deal on Medicare, Medicaid and other big programs unless Republicans agree to real revenue, no matter who is elected, these Democrats said.

Daniel Newhauser and Jonathan Strong contributed to this report.