Will this deal end the shutdown? (Update: No.)

October 12, 2013

For all the excitement over the talks between House and Senate Republicans and the White House, the discussions aren't very specific. As one House GOP aide says, "It’s negotiations about having more negotiations." Meta-negotiations, if you will.

Let me finish. (Pete Souza/White House)
"Let me finish." (Pete Souza/White House)

Strangely, though, just talking has made everyone feel a bit better. House Republicans felt disrespected by President Obama's refusal to negotiate. They thought he was dismissing their constitutional role. Their anger has eased now that they're in discussions.

But that's about as far as the two sides have gotten. Various ideas have been floated, but the White House hasn't come close to agreeing to anything. Republicans have left the talks feeling positive but confused. As Rep. Paul Ryan said, the president “didn't say yes, didn't say no."

What has changed in the past two days is that the outline of a possible deal is beginning to float around Capitol Hill -- and staffers are beginning to believe a solution is in reach.

The initial deal is likely to center on repeal or delay of the medical-device tax. The broader negotiations that follow the deal will focus on replacing sequestration. The question in both cases is how to sequence the deals so that everyone saves face.

The immediate way out of the shutdown is likely to be something based on the bargain Sen. Susan Collins has proposed: repeal or delay of the medical-device tax, a strengthening of the income-verification procedures under Obamacare and more discretion over the sequester's cuts in return for a CR and a debt-ceiling increases that last for a few months. There's also talk of modifying Obamacare's (now-delayed) employer mandate.

Senate Democrats are open to this because they support -- and have voted for -- repealing the medical-device tax. The White House is more or less indifferent. But they don't support repealing it as the cost of reopening the government or raising the debt ceiling.

So a key question here is sequencing: How do Democrats make it look as though they're not giving away concessions to reopen the government -- particularly given that that, in fact, is what they're doing?

The possible deal, on its face, doesn't seem to satisfy many of the demands of House Republicans. But it would open the way for the budget negotiations that Republicans want. That's where Rep. Paul Ryan (R-Wisc.) comes in. He's been trying to convince House Republicans that there is a budget deal that they can achieve -- and that's worth achieving: lifting a few years' worth of sequestration for some of the entitlement reforms and other mandatory spending cuts in Obama's budget.

"Most of us agree that gradual, structural reforms are better than sudden, arbitrary cuts," he wrote in the Wall Street Journal. "For my Democratic colleagues, the discretionary spending levels in the Budget Control Act are a major concern. And the truth is, there's a better way to cut spending. We could provide relief from the discretionary spending levels in the Budget Control Act in exchange for structural reforms to entitlement programs."

Or, as the House GOP aide put it: "It's trading sequester cuts which everyone hates for cuts that people hate less."

White House officials might be open to this deal. They loathe the automatic cuts, and on a policy level, they're open to the mandatory cuts in their budget, which include some entitlement cuts, such as raising Medicare premiums on richer retirees. They think those policies are good policies, although they haven't, thus far, wanted to pass them absent a deal that included tax increases.

But a deal like that would be a tough sell with the Democratic base -- not to mention the Democrats on the Hill. It would mean Democrats essentially admit they've lost on sequestration: The policy will lead to entitlement cuts but not to a grand bargain that includes taxes.

Of course, Democrats actually have lost on sequestration: It's not going to lead to a grand bargain that includes taxes. If Democrats don't replace sequestration with cuts they prefer, sequestration is likely to simply persist.

There's another reason Senate Democrats might prove resistant to this deal. "For midterm elections, old people vote in a very significant way," says one Senate Democratic aide. "I don’t think Harry Reid lets that go."

But passage isn't really the point -- at least not yet. In order to move past the shutdown, the GOP must believe it will get something it actually wants out of the negotiations. This is the thing its members are beginning to believe they actually might get.

The big problem here remains the debt ceiling. The White House simply isn't going to give much up unless it includes a serious, lengthy increase in the debt ceiling (in this way, it is, in fact, negotiating over the debt ceiling, or at least meta-negotiating over the debt ceiling). White House officials are opposed to negotiations that end alongside another expiration in the debt ceiling, as that's just another way of letting the GOP threaten default unless Republicans get what they want. But Republicans don't want to enter into budget negotiations that aren't backed up by the threat of default, as they believe that reduces their leverage.

As far apart as the two parties are on the policy right now, it's the process that continues to be the tougher obstacle.

Update: On Friday night and Saturday morning there was real interest, including from some in the Senate Democratic leadership, in Collins' deal. But as Saturday wore on the skeptics won out.

Two main arguments were made against the Collins deal. First, it locks in sequestration levels of spending for six months. Key Senate Democrats see that as a much larger, and more dangerous, concession than the old CR, which only agrees to it for six weeks.

Second, the deal's delay of the medical device tax meant it was, in fact, a concession in order to reopen the government -- and Democrats think it's important to persuade the GOP that they can't win anything through this kind of hostage taking.

Behind these arguments is the fact that Senate Democrats strongly believe the GOP is losing this fight, and badly. What they hope happens next is this: The GOP eventually caves on the debt ceiling and reopening the government for some period of time. The next time this fight comes around top Republicans will be desperate to avoid making the same mistakes and grievously wounding their party again. At that point, the Republican Party will be more interested in making a budget deal that replaces sequestration in a way Democrats can accept.

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Lydia DePillis | October 12, 2013