WASHINGTON -- Dire headlines about the ongoing "fiscal cliff" debate might give the impression that the country is destined for a harrowing economic jolt. But buried in the stories and slightly visible behind the public posturing, signs are emerging that a deal is possible.
House Republican leaders on Monday presented a plan to the White House that included an extension of all the Bush tax cuts, steep changes to Medicare and large cuts to mandatory and discretionary spending. The White House promptly rejected it as a stale GOP wish list that would hurt the middle class.
In private, however, both sides sounded decidedly more optimistic. The Republican offer provides negotiators with a framework to match the one presented by President Barack Obama's administration last week. And while the two presentations are dramatically different, negotiators can now begin trading bits and pieces in hopes of finding a resolution before the end of the year.
A top administration official agreed that Monday represented a "measure of progress," adding the belief that the president has significant leverage to move the House GOP off of its proposal. Similarly, a top House Republican aide said it is “definitely” progress that the White House and GOP leaders have now put forward opening bids, saying the administration still has retreat from its “absurd and ridiculous” starting point.
"Everybody in Washington knows there's certain choreographed steps that you have to go through when you have to get a deal, and part of that is the public admonitions of the other side," said the GOP aide. "But we don't want to take us off the cliff. We do want a deal."
Though neither side would offer much detail about concessions they would be willing to make, the hypothetical next steps in the negotiating process aren't difficult to envision. The House GOP, for example, has offered that any deal include a change in the way the inflation is measured. Republicans may be forced to drop that idea as it violates the president’s pledge to consider reforms that would affect Social Security outside of the fiscal cliff negotiations. A separate GOP proposal to raise the eligibility age of Medicare may be more palatable to Obama -- so long as it is done over the course of several decades -- as he agreed to something similar when he and House Speaker John Boehner (R-Ohio) attempted to negotiate a grand bargain in the summer of 2011.
The White House has chips to give up itself. It has called for additional stimulus spending -- a request that could meet the chopping block in subsequent negotiations. The president has also asked Boehner to cede full control of the debt ceiling, a congressional power with which the speaker likely will not part. Several congressional Democratic aides predicted that provision would be sacrificed by the White House.
An agreement will require each side to massage bruised feelings from their respective bases, aides said. The difficult task will remain bridging the divide over tax rates. A top Senate Democratic aide, who expressed optimism following the GOP's letter to the president, said "a deal can fall into place very quickly” if Republicans "rip the Band Aid off on tax rates." Democrats also insist that if Boehner ends up keeping authority over the debt ceiling, he at least must pass a bill to raise the ceiling as part of the final deal.
Some senators who are part of the bipartisan "Gang of Eight," which has been working on its own ideas based largely on the Simpson-Bowles plan, said they saw the competing offers as a sign of progress as well.
"It is," said Sen. Saxby Chambliss (R-Ga.), calling Boehner's proposal "exactly in accord with the philosophical position of the Gang of Eight."
Sen. Kent Conrad (D-N.D.), another member of the group, said the GOP proposal was not big enough or balanced enough with revenue, but acknowledged that “it's another step along the way, and hopefully it can be built upon to get to a conclusion that would be more balanced and bigger.”
Still, the provisions may very well end up proving too difficult to reconcile for the primary negotiators. Democratic insiders raised several red flags about the GOP offering.
"This proposal contains no new concessions from the Republicans," said a Democratic leadership aide, who was not permitted to speak publicly about negotiations. "It is a Republican wish-list, just like the president’s opening position represented his ideal scenario. The difference is, the election showed the public prefers the president’s approach."
The aide pointed to four problems Democrats have with the offer, first arguing that "it doesn’t admit reality on tax rates – in fact, it envisions a rate cut for the wealthy."
Democrats, Obama and even the original Simpson-Bowles deficit reduction plan on which Bowles based the proposal that Boehner cited as his inspiration all call for the Bush-era tax rates to expire for the top earners.
Democrats said they also are unhappy that Boehner's offer makes no down payment on deficit reduction right away, and argued that he punts into 2013. They said they see the GOP deal as unbalanced, asking for $900 billion in mandatory cuts, including $600 billion in health care cuts, with only $800 billion in new revenue. Obama is seeking $1.6 trillion in revenue. Democrats also insist the debt ceiling be dealt with.
The Bush-era tax cuts expire at the end of the year, when the budget cuts mandated in last year's borrowing cap negotiations start to kick in. Economists have warned that if both happen, and the country falls off the “fiscal cliff,” it could tip the economy back into recession.
Michael McAuliff and Jennifer Bendery contributed to this report.