The key players in the budget negotiations finally sat down together for the first time on Friday, but are still feeling each other out as they establish their opening gambits. Congressional leaders, including the minority and majority leaders in both houses of Congress, visited the White House today with just about 45 days remaining before the end of the year and dreaded tax hikes and spending cuts of the fiscal cliff.
The opening move for the White House was to leak to The Wall Street Journal this morning that the president's advisers are having "internal discussions" about a smaller package of spending cuts that would replace the unwanted "sequester" that would slash $100 billion from the budget automatically on January 1. This new deal would essentially postpone the major reductions until the middle of the next year, giving both sides some breathing room, but not really solving the overall problem. Both sides projected optimism that a deal will be made, but beyond some handshakes and photo ops, it's doubtful that much real progress was made today.
It's almost hard to imagine a deal getting done before January, however, as most Americans won't be paying too much attention to the usual gridlock politics of Washington. That is until they get their first paycheck of 2013 and find out just how badly they've been hit. One of the under-appreciated aspects of falling off the "cliff" would be the loss of the payroll tax holiday, which is the one measure that taxpayers notice immediately. That hits every employee right in their pay stub and take home pay is how people really determine just how rich they are. When people see the extra spending money they've been enjoying for the last two years drop by hundreds, maybe even thousands, of dollars a month, that's when the real revolt happens.