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Mixed Economic News Faces Budget Talkers as Congress Returns

Updated: 6:00 p.m. | Some decidedly mixed economic signals are greeting lawmakers as they begin their balky return for the final month in this historically lackluster year of legislating.

Gloomy numbers for the opening four days of holiday shopping season were followed Monday by heartening reports about the pace of construction and manufacturing this fall. The biggest economic news before the end of the year, though, will be the monthly jobs report that’s issued Friday.

On the Hill, the overriding question is whether those indicators will spur or slow the budget talks. They have gained outsized attention because so little else is going on — even though the negotiators have made clear they’ve decided to reach for an extremely modest goal, hoping that hitting even a relatively easy target will send Congress home for the holidays to a sigh of voter relief.

The House returned from Thanksgiving on Monday, with top Republicans sounding pretty emphatic about the last votes of the year coming by the end of next week. That target adjournment seems overly optimistic to many, but it’s another indication of just how little is on the GOP leadership’s must-do list before the end of 2013. This, after all, is the first year in several without any hard and fast deadline galvanizing national attention. (The closest thing is the return of the “dairy cliff,” an expected steep rise in retail milk prices in early January unless some provisions of the stuck-in-conference farm bill are extended.)

Senators were given this week off in anticipation that they may be needed in the third week of the month, which means all the lights at the Capitol may not be dimmed until the weekend before Christmas.

But Friday the 13th is the nominal deadline — set, without any consequences for tardiness, in the deal that ended October’s partial government shutdown — for budget conferees to come up with some kind of middle ground fiscal blueprint.

House Budget Chairman Paul D. Ryan, R-Wis., and Senate Budget Chairwoman Patty Murray, D-Wash., seem to agree that total failure is not an option. They’re also sending similar signals about wanting to achieve something that won’t automatically be labeled with derision as “just another kicking of the can down the road.”

What they are inching toward is an agreement of modest scope but nonetheless lasting more than 20 months — promising an unexpected period of budgetary stability lasting until October 2015, essentially the halfway point between the coming midterms and the next presidential election.

The main provision would be a partial easing of the next two spending sequesters — not only the automatic curbs for the current budget year, set to take effect Jan. 15, but also the round of reductions set for the coming fiscal year, which starts in October. Negotiators are talking about a minimum of $30 billion and a maximum of $60 billion in sequester relief for both this year and next, sufficient not only to save the Pentagon from the coming round of cuts but to allow some domestic priorities to be reordered as well.

The final amount depends on what the dealmakers can agree is an appropriate handful of provisions to “pay for” the additional appropriations.

On the revenue side, nothing that might be labeled a “tax increase” is on the table — a prerequisite for the GOP. Instead, there’s talk of raising multibillion-dollar slivers of new money by boosting some fees — for aviation security, customs processing, the government’s pension backstop and mortgage services, for example — and selling more of the government’s frequencies on the broadcast spectrum.

On the spending side, curbs on Medicare and Medicaid have also been set aside — on the grounds they would be too politically toxic for Democrats. Instead, the recent focus has been on modest ways to curb other mandatory programs, especially benefits for federal retirees and the Postal Service.

A handshake deal in the next two weeks would reliably win the public embrace of both parties’ leaderships, and they could promise ratification votes early enough in the new year to ward-off any Christmastime anxiety about the Jan. 15 expiration date on the current stopgap spending law.

The assumption is the accord would soon enough gain grudging acceptance from majorities of both small-government Republican conservatives and big-government Democratic liberals — critical masses on each side willing to claim some credit for a rare piece of congressional compromise, especially one that allows them to promise constituents the government shutdown countdown clock has been turned off for almost two full years.

So will the economy’s own recent performance speed or slow the last steps to a deal?

The National Retail Federation reported that the four days of Black Friday weekend saw sales of $57.4 billion, a 3 percent drop from last year even though many more stores were open on Thanksgiving Day. That might give lawmakers reason to think they need to bend over backwards to give consumers a reason for optimism in the shopping season’s closing days.

But manufacturing accelerated to its fastest pace since April 2011, according to the monthly index from the Institute for Supply Management. And the Labor Department reported that builders poured money into their jobs in October at the fastest pace since May 2009 — thanks mainly to a 10.9 percent surge in spending on federal government projects. So, the 16-day partial shutdown hardly translated into idled construction sites. Some lawmakers might use those numbers as evidence the economy will do fine no matter what fiscal discipline Congress sets.

Look for the jobs report to tip the balance in favor of an agreement. Whether the numbers are below or above expectations (180,000 new payroll positions and a one-notch drop in the unemployment rate, to 7.2 percent) a crucial bloc of Republicans will want to avoid any possible blame for extending this destabilized recovery.

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