The Shape of a Deal to Avoid Fiscal Cliff Is Emerging

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The agreement would likely see Democrats get the tax increase of top earners they've been demanding.

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Top staffers are working on a fiscal cliff deal after leading Democrats emerged encouraged from a Friday White House meeting in which Republican leaders did not explicitly reject the suggestion they accept a Senate-passed bill that would allow tax rates to rise on top earners, leadership aides said.

Democrats hope their bill, which would need to pass only the House, can serve as a "down payment" this year in a deal that would include agreement on a mechanism to enact tax and entitlement reforms next year.

"The real development from our standpoint is that we said we are absolutely clear that we are sticking to our position that the Senate bill is what is [going to] happen between now and December 25th," the Democratic aide said. "Notably, Republicans didn't shoot that down."

The bill the Senate passed freezes rates for households earning under $250,000 and patches the Alternative Minimum Tax.

Senate Minority Leader Mitch McConnell spokesman Don Stewart mocked the suggestion GOP leaders' silence on Democrats' suggestion is significant. "We didn't rule out unicorns," Stewart said. "We didn't rule out building a cheese factory on the moon and Democrats didn't rule out abolishing the EPA."

Still, rather than flatly rejecting Democrats' suggestion, GOP leaders said that their staffs would work in the coming week on binding proposals to reform the tax code and get savings from entitlement programs, staffers said.

An aide to House Speaker John Boehner earlier Friday said the GOP's goal for the coming weeks "is to settle on long-term revenue targets for tax reform as well as targets for savings from our entitlement programs." With targets agreed on, "we can create simple mechanisms, in statute, that would achieve those revenue and spending goals," the aide said. "They would be in place unless or until more thoughtful policies replace them."

The Democratic leadership aide did not dispute that description, except to say it overlooks action to be taken in December. When considered along with Republicans' muted reaction to Democrats' proposal to pass the Senate tax bill, the aide argued the upshot of the meeting is the probability the GOP will accept, in December, an increase in taxes on top earners in exchange for agreement on binding tax and entitlement reform mechanisms next year.

"That is basically where we're headed," the aide said. "We're gonna win."

McConnell and Boehner have publicly said they will not agree to any increase in tax rates.

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Dan Friedman is a staff writer (Senate leadership) for National Journal.

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