The bipartisan budget talks led by Vice President Joe Biden hit a speed bump on Thursday when House Majority Leader Eric Cantor, (R-Va.), declared that it was time for President Obama and House Speaker John Boehner to negotiate directly. But many of the key players remain cautiously optimistic that the effort will eventually produce an agreement to meaningfully reduce Washington's projected deficit over the next decade.
Then the hard work will begin.
Democrats and Republicans in the talks both appear to have accepted the goal of matching any increase in the debt ceiling with a dollar-for-dollar reduction in the next decade's federal deficit. If the negotiators hit that standard, the discussions could produce as much as $2 trillion in deficit reduction over 10 years (as Cantor himself acknowledged). That's not enough to prevent the federal debt from rising, but it is a reasonable first step--and certainly more than seemed possible when the two sides first convened.
Pawlenty Runs from Past on Environmental Policy
Obama's Choice: A Partial Exit, With Reelection in Mind
Washington Losing Patience With Counterinsurgency in Afghanistan
Still, insiders believe that the talks are likely to find those savings mostly by squeezing domestic and defense discretionary spending, while moving only modestly to restructure entitlement programs and the tax code. In one sense, that's understandable: Both parties are reluctant to settle those critical choices until they learn whether the 2012 election increases their leverage. But taxes and entitlements are unavoidably the key to stabilizing the long-term debt. That means, whatever happens in the current talks, Washington will need to confront those explosive issues again, probably in 2013.