Without Negotiating, Obama and Boehner Eye Big Deal

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US Speaker of the House, Republican John Boehner, center, walks to a meeting of House Republicans

President Barack Obama and Speaker of the House John Boehner may suffer from what one official termed a “trust deficit,” but that is not defeating hopes of a negotiated settlement to this month’s fiscal crises.

While Obama has forsworn negotiation on these issues entirely and Boehner has long said he’s done negotiating one-on-one with the President, that has not stopped aides to both leaders from drawing up potential pathways to a deal, albeit without talking to each other. On both sides of Pennsylvania Avenue, officials are independently planning for a significant compromise to reopen the government and increase the debt limit, according to sources close to House Republicans and the White House.

It’s far from the first time the two leaders have tried to go big, or in the parlance of modern Washington, tried for a “grand bargain.” Beginning with the 2011 debt limit fight, the two leaders have repeatedly come close to a sweeping deficit and spending deal, at one point approaching cutting $4.5 trillion in future spending. Now aides say neither side is considering a solution so large, in part because the nation’s fiscal house is in better shape than two years ago thanks to the cuts and new taxes already implemented.

Under discussion are options to replace the mandatory spending cuts enacted when the super committee failed to reach agreement on deficit reduction in 2011 with a combination of entitlement and tax reforms. Details remain sketchy, and both sides are not as yet ready to engage in direct talks, sources said, relying on informal backchannels and waiting for the shutdown to run into the urgent need to raise the debt limit by the middle of the month.

Boehner has privately told Republicans that he will not allow the nation to default for the first time on it¹s debt, but it remains to be seen how the Speaker will lead his conference to work with Democrats after consistently putting government funding proposals on the floor with little of their support this past month.

Helping the idea move forward is that both sides know what they can put on the table: entitlement reforms, such as chained CPI (which would slow the rate of increase for social security benefits), and an elimination of the medical-device tax, for fixing sequestration cuts and raising the debt limit. These ideas have been floating around Washington for so long that one budget aide said “we just copy and paste” the language into a new bill, meaning a theoretical deal could go from handshake to signature within a couple of days.

There are however two large snags in any potential deal: tax reform and Obamacare. While several tax reform plans have been circulating on Capitol Hill, aides say none is quite ready for primetime. Broad outlines of reform could be agreed to, though Democrats and Republicans will have to reach agreement on whether rewriting the tax code should result in raising new revenues.

“Democrats just fought for almost $700 billion of new revenue seven months ago,” Rep. Kevin Brady (R-Texas), a member of the House Ways and Means committee, told TIME Wednesday. “Their appetite is insatiable, but they have to understand they’re not getting any this time.” Other Republicans have suggested privately that there could be some revenue, from closing loopholes, if rates do not increase.

Republicans must also find a suitable offramp from their insistence on taking a bite out of Obamacare, which led to the current shutdown. They will have to drop demands to defund or delay the law and the individual mandate, but may well be able to get Democrats on board with repealing a small part of the law, a controversial medical device tax.

The White House, meanwhile, would have to back off its steadfast opposition to negotiating over reopening the government or Congress raising the debt limit—a position adopted after two years of serial fiscal battles. “What he won’t do is, as he just said, negotiate with the Republicans while they have the American economy held hostage in—and are trying to extort partisan demands from the economy, from the American people in return for reopening the government or in return for ensuring that we pay our debts,” White House Press Secretary Jay Carney said Friday.

But Carney added that Obama continues to seek a broad agreement with Republicans, and replacing the sequestration cuts and achieving tax reform would far outweigh the cost of turning back on his no-negotiation promise. “What the president has long sought is a broader agreement with Republicans on how we fund our government, what kind of choices we make to ensure that we’re investing in the right areas so that the economy grows and the middle class is expanded and protected,” Carney said. White House Chief of Staff Denis McDonough was on Capitol Hill Friday meeting with lawmakers.

Working against the idea is the current relationship between congressional leaders. House Budget Chairman Paul Ryan hasn’t spoken to Senate Budget Chairman Patty Murray since before the shutdown, says a Senate aide familiar with the situation. But some believe the time is finally ripe for Boehner to cut a deal, having secured Majority Leader Eric Cantor’s full backing on strategy.