Can A Bipartisan Deal on Deficit Reduction Work?

Showing a little leg on deficit reduction is a highly risky proposition these days: the scantest hint of skin and you risk losing a limb. The ink was still cooling on the final edition of the Wall Street Journal's front-page story Thursday detailing a grand bargain on deficit reduction that a bipartisan group of six senators are working on a when the angry missives began. Grover Norquist fired off a letter at the three Republican senators in the talks — Oklahoma's Tom Coburn, Idaho's Mike Crapo and Georgia's Saxby Chambliss — accusing them of treachery. "I urge you to reject this so-called 'deal' which is little more than a transparent attempt to hike taxes and put off the spending restraint the country so clearly called for in the 2010 elections," Norquist, the president of Americans for Tax Reform, wrote.

The trio responded hours later defending the negotiations. "Proposals that simplify the tax code, broaden the base, lower all individual and corporate tax rates, and make our corporate tax code more competitive for U.S. business will create a surge in economic growth," they wrote.

The gang of six — Coburn, Crapo, Chambliss and Democrats Kent Conrad of North Dakota, Illinois' Dick Durbin and Mark Warner of Virginia — have actually been meeting for months, but episode shows how hard it will be for both sides to join hands and jump together into a public debate. If Social Security reform is the third rail of American politics, overhauling Social Security, Medicare, Medicaid, defense and discretionary spending and taxes all at once is akin to throwing yourself into a nuclear reactor: if you come out glowing it's rarely in a good way.

Senate Minority Leader Mitch McConnell this week said "entitlement reform will not be done except on a bipartisan basis with presidential leadership" — in other words he's waiting for President Obama. But the President has taken a wait-and-see attitude, hardly mentioning entitlement reform in his 2012 budget. When asked about this, Obama said: "This is not a matter of 'You go first' or 'I go first.' This is a matter of everybody having a serious conversation about where we want to go and then ultimately getting in that boat at the same time so it doesn't tip over. And I think that can happen."

And yet there is little interest among Obama's inner circle in putting out a fixed proposal of entitlement reform to be criticized from by the left and picked apart by Republicans. Instead, the president is hoping for a repeat of the backroom negotiations that led to a tax break deal in December. But most important of all, Obama's aides want to make sure that the president comes out of debate over entitlement reform as one of the adults in the room, someone who is willing to compromise and willing to work hard to solve problems, even if he is not urgently driving the process.

Which leaves Congress in the driver's seat for the time being. That process is split in two. House Republicans have said they plan on including entitlement reform and deficit reduction measures in their 2012 budget due out in April. "Our budget will lead where the President has failed," House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said in a joint statement with GOP leaders. "It will include real entitlement reforms so that we can have a conversation with the American people about the challenges we face and the need to chart a new path to prosperity,"

While in the upper chamber Conrad, the Senate Budget Committee chairman, leads his gang of six. The group is hoping to circulate a draft of their proposals next month to the more than 40 senators who have expressed interest in the talks. They are considering two legislative options, says a senior Democratic Senate aide. One is to attach the deal to a bill to raise the debt ceiling expected at the end of April or early May. Conrad is also weighing adding whatever deal is reached to the budget, as is his prerogative as chairman. If Conrad and Ryan — who are personal friends — can hammer out an agreement between the two budget committees on deficit reduction, the package could be passed in the Senate with just 51 votes under reconciliation — a privileged budget resolution.

Though the White House has been careful not to get too involved in the process, they have drawn a few lines in the sand. The Administration would prefer not to see any agreement attached to the debt ceiling measure, Office of Management and Budget director Jacob Lew told reporters Thursday, and they want to see Social Security dealt with separately. "It is essentially a parallel issue and it's important for it not to be confused with either contributing to the problem or a central part of the solution," Lew said.

Negotiators in Congress are looking at Bill Clinton's 1997 Balanced Budget Act, negotiated with Newt Gingrich, and the 1984 Deficit Reduction Act as models. Both passed under reconciliation and both included triggers — imposing certain cuts or austerity measures when a spending cap is reached. But both were later criticized by some fiscal conservatives for including what became tax hikes. This time around Conrad and Ryan are looking to the blueprint left in December by the deficit reduction commission on which they both served. The commission recommended an overhaul of the tax system that would bring in $180 billion in new revenues over the next 10 years — a bitter pill for the Tea Party generation to swallow. Just as the $1.7 trillion in spending reductions the commission laid out would be hard for Democrats to stomach. To achieve this would take not only Conrad and Ryan, but Obama, McConnell and House Speaker John Boehner, all showing a lot of leg in good faith the others won't lop theirs off.