Nov. 7, 2012 – 9:31 a.m.

Election Offers No Clear Path Toward Sequester Agreement

With the White House and Congress holding a rough status quo after the election, the protracted conflict between the two parties over what to do about the $1.2 trillion sequester will extend into a lame-duck session without clear direction from voters.

The sequester would result in $109 billion in automatic, across-the-board spending cuts in fiscal year 2013, including $55 billion from defense. While most lawmakers say they would like to find a way to avoid the cuts, Republicans and Democrats are at an impasse over how to replace those cuts. Republicans generally favor substituting other spending cuts, generally aiming them at domestic programs. The House passed a reconciliation bill (HR 5652) in May that would replace about $94 billion of the cuts with reductions in mandatory spending spread over 10 years. Democrats in both chambers as well as Obama have insisted on a plan that also includes additional revenue.

Any agreement to delay or replace the sequester is likely to be tied to broader negotiations to avert the expiration of the George W. Bush-era tax cuts (PL 107-16, PL 108-27).

Few expect that Obama and the Congress will agree on a comprehensive deficit reduction package in the lame-duck session. At most, the hope is that they could push off the automatics for some time while agreeing on a framework for deficit reduction, with the details to be worked out by congressional committees next year. Such an agreement could include a delay in both the sequester and the expiration of the tax cuts.

Some believe the president will make an opening bid to House Speaker John A. Boehner, R-Ohio, within days or the next couple of weeks addressing the sequester and the fiscal cliff. “All indications are that the White House is going to make the first move and the ball will be in Boehner’s court,” a senior Democratic Senate aide said. No comment was available from the White House.

Even with some election results still up in the air Wednesday, Democrats signaled the onus would be on GOP lawmakers, including House Budget Committee Chairman Paul D. Ryan of Wisconsin, the losing vice-presidential candidate, to reach across the aisle. “He has a fundamental choice to make,” Rep. Chris Van Hollen of Maryland, the ranking Democrat on the Budget Committee, told CNN on Wednesday. “He can be part of the solution or he can continue to be a spokesman for the tea party wing of the party.”

Skepticism Abounds

Some observers on both sides of the political spectrum believe efforts to postpone the sequester will fail.

James R. Horney, vice president for federal fiscal policy at the left-leaning Center on Budget and Policy Priorities, doubts a deal will be reached before next year. “It’s most likely that we’ll go into January, that the sequestration will actually happen, the tax cuts will expire and that we’ll have very serious, fast negotiations in the first weeks of 2013 to try and come to some agreement, at least a framework about how to deal with all those things,” he said.

Tax increase foe Grover Norquist, president of Americans for Tax Reform, also expects the automatic spending cuts to be triggered with Obama as president. “The sequestration takes effect because the Democrats, they’re not interested in protecting the defense sequestration, Republicans don’t want to give up the savings on non-defense issues, and there’s no constituency to raise taxes just to cover the military sequestration,” he said.

Steven S. Smith, director of the Weidenbaum Center on the Economy, Government and Public Policy at Washington University, thinks at least a partial postponement of the sequester and temporary extension of most or all of the tax cuts is possible. “Neither side is going to be willing to concede on its top priority – taxes for the Republicans and entitlement spending for the Democrats – in order to get a long-term deficit reduction plan in place,” he said. “So what do they do then? Well, some version of what they managed a year ago, which is to muddle through with a short-term fix.”

Former Senate Budget Chairman Judd Gregg, a New Hampshire Republican, expects efforts among a clutch of senators working on a bipartisan deal to produce a $4-trillion-to-$5-trillion deficit reduction framework will bear fruit. Gregg, who is involved in the effort, said the proposal could be used by lawmakers and the president “as a resource to reach a comprehensive agreement.”