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“The president obviously stands by his budget and believes any big package with entitlement reforms must have new revenues,” a source familiar with the White House’s thinking said. “But he did not want to take options off the table with regards to a smaller package before conference committee work was even under way.”
But there seems to be a growing realization among Democrats that the fiscal-cliff deal — which gave Republicans permanent tax cut extensions for 99 percent of the country but failed to deal with the sequester — has now left them little leverage to ask for another tax increase, which would require Republicans to break their no-tax-hike pledges.
To be sure, Democrats will still demand revenue if Republicans want big entitlement cuts in return.
But there are a variety of other items that could be cobbled together for a short-term package like the farm bill— with aides noting various fee increases Republicans have gone along with in the past to spending trims that don’t affect core Medicare, Medicaid or Social Security benefits.
Another Senate aide said Senate Budget Chairwoman Patty Murray, D-Wash., will be very reluctant to agree to any deal without revenue of some kind, lest a precedent be set that would apply to future years.
But without a deal, an even worse precedent for many Democrats could persist — the sequester continuing unabated, year after year.
If the two sides fail to reach a deal by Jan. 15, appropriations will be cut from $986 billion to $967 billion.
Republican aides suggest that if Democrats refuse to approve a spending plan keeping the sequester in place, they’ll be the ones who will get the bulk of the blame for a shutdown.
Senate Minority Leader Mitch McConnell, R-Ky., has clung to the lower spending levels as a key achievement, aides note. And it’s one that many Republicans believe will eventually have Democrats coming to them for relief, rather than the other way around.
Democrats, of course, differ. Their hope for leverage — a point made repeatedly by Rep. Chris Van Hollen, D-Md., the ranking member of the Budget Committee — is that because of a quirk in the law, next year’s sequester cuts will hit defense programs favored by the GOP while domestic programs will essentially remain flat.
“It all falls on defense,” the first Democratic Senate aide said. “I don’t think a lot of Republicans are going to be claiming that as a big victory.”
There are plenty of people on Capitol Hill who don’t think Congress will suddenly find a way to function, even on what amounts to small ball — and who believe they’ll be staring at each other on Jan. 15 hoping the other side blinks.
“Our expectations are low. Unless the president is willing to deal on entitlements, which he hasn’t before, it’s hard to see how there’s any significant agreement that comes out of the budget conference,” one Senate GOP aide said.
Several aides said Republicans will not concede the sequester spending levels and said they believe that any further agreement to fund the government or raise the debt limit would happen outside the confines of the budget conference.