The Real Budget Action Won't Come Until Wednesday's Dinner With the GOP

Contrary to popular belief, the real budget action on Wednesday won’t begin until the early evening, when 12 Republican senators are scheduled to arrive at the White House for a private dinner with the president.

By then, the White House’s Office of Management and Budget will have released the hundreds of pages of the president’s budget proposal. Congressional Republicans will have united and mobilized to attack it by saying it does not go far enough to tame the long-term debt. And, pundits will have spent hours debating the budget’s overarching themes on the endless loop of cable TV.

Yet this predictable sequence of events is not likely to matter in the coming months. Nor will the president’s actual budget blueprint. Instead, the most important fiscal development of the week will hinge on the success of the president’s dinner with a handful of Republican senators, organized by Sen. Johnny Isakson of Georgia.

This so-called charm offensive is the key to any budget deal this spring, even a small one, and will determine the Republicans’ receptiveness to the president’s offer in his budget to cut Social Security benefits and slash billions from Medicare. “This is an offer, not a starting point for negotiations,” stressed one senior administration official, roughly 24 hours before the White House was to release its fiscal year 2014 budget.

If Wednesday’s bipartisan dinner goes well, as the last dinner with Republican senators did, then the path to a budget compromise this spring and early summer becomes clear: through the Senate. The White House is slowly trying to woo enough Senate Republicans to move a budget deal through the chamber and then pressure House Republicans to act—similar to the script used during the fiscal-cliff deal.

Already, there are a few, small reasons for optimism. Republican senators seem pleased that the president is willing to cut roughly $230 billion in government benefits, including Social Security, by changing the cost-of-living calculations for benefits. “‘Chained CPI,’ means-testing, and age adjustment, I think, will save these programs from bankruptcy and avoid us becoming Greece,” said Sen. Lindsey Graham of South Carolina, who attended the previous private dinner with the president.

“In return, I would raise revenue by flattening the tax code, paying down debt, and lowering some rates,” he added.

Republicans also seem open to the president’s broad budget ideas of cutting roughly $400 billion in health care entitlement programs, closing loopholes, and overhauling the corporate tax code in a revenue-neutral way, though the two parties disagree on the details.

Congressional Democrats and labor unions strongly dislike the idea of chained CPI because they say it would hurt low-income people at a time when multinational corporations often pay low effective tax rates. The White House has said that it will introduce measures to protect the “vulnerable,” including low-income veterans and older senior citizens, from the chained CPI cuts, but those details will not arrive until the official budget release.

Wednesday’s round of the charm offensive brings into the fold 12 more GOP senators, including Utah’s Orrin Hatch, the ranking member of the Finance Committee, who would help to oversee any overhaul of the tax code.

Meanwhile, much of what the president will propose in his budget on Wednesday is a repeat of previous ideas, like instituting a minimum tax on millionaires, known as the “Buffett Rule,” or by capping tax deductions at 28 percent (excluding charitable deductions) for families with household incomes above $250,000. Such moves would raise $580 billion, senior administration officials say—money that will go toward undoing sequestration and reducing the deficit.

New policies such as universal prekindergarten would be paid for through new or higher taxes, say senior administration officials. Overall, the president’s plan would reduce the deficit by $1.8 billion over the next decade and bring the deficit to 1.7 percent of gross domestic product by the year 2023.

What Wednesday’s fiscal blueprint release shows is a president who wants to appear ready to cut a budget deal at any time this spring ahead of the next debt-ceiling fight.

By incorporating the Social Security cuts in his budget, the president is formalizing the final offer he made to House Speaker John Boehner during the fiscal-cliff talks and extending that olive branch to new people—in this case, Senate Republicans. The next few months will determine if they will accept it and, in turn, potentially realize some structural changes to Social Security that have long been anathema to Democrats.

Either way, the White House continues to quietly work the Senate. Since the first dinner, one lawmaker said that he has met with the White House chief of staff in his Hill office.

“We had a very good meeting,” said Sen. Bob Corker, R-Tenn. “Again, there are no concrete steps. I don’t think I know enough yet [about the president’s budget] to make a comment.”