Reality begins to bite in spending talks

The prospect of a government shutdown remains real, but for the first time in the weeks-long standoff over how much spending to cut, real bipartisan negotiations have begun over what, precisely, will be cut and by how much.

The White House gave its okay to a total of $33 billion in cuts in current discretionary spending, $10 billion of which has already been achieved through two stopgap spending bills. Late on Wednesday, senior staff of the House and Senate Appropriations committees began the arduous process of determining which discretionary programs will fall under the budget knife.

Those talks continued on Thursday and are likely to drag into the weekend. Right now, there isn't even a deal on the simplest issues, such as a timeline to complete the work, how much each Appropriations subcommittee will be instructed to cut, and the process of bringing the final package to the House and Senate floor (expedited or subject to the House GOP's three-day rule for public review and House consideration). In other words, much nuts-and-bolts work lies ahead.

And it will be done with scant White House involvement. House Appropriations Committee Chairman Hal Rogers, R-Ky., and his Senate counterpart, Daniel Inouye, D-Hawaii, will drive the process of writing the underlying bill. Republicans hold out hopes that they can achieve spending cuts larger than $33 billion (moving them closer to the House-passed $51 billion in cuts), but know that's unlikely to occur.

More importantly, the long-standing House GOP devotion to its $51 billion in cuts is over. Speaker John Boehner, R-Ohio, informally declared the retreat on Thursday when he said Republicans would "continue to fight for the largest spending cuts that we can get." That Boehner said this on the same day the Tea Party Patriots held a sparsely attended rally at the Capitol to demand a hard-line in budget talks spoke volumes about the coming clash between GOP leaders and grassroots activists on the 2011 budget endgame. Grumbling tea party members have already accused Boehner of selling out the movement, and talk of a Boehner primary challenge has begun to crop up.

"It wasn't a statement of concession," said Boehner spokesman Michael Steel. "It's just a statement of reality. We control one-half of one-third of the federal government."

Rank-and-file House Republicans saw it as a bright white flag-albeit sheepishly waved-and a sign that House GOP leaders want to finish the fiscal 2011 budget and move onto bigger battles over entitlement reforms. Leadership aides expect at least as many House GOP defections on the final budget deal as occurred when 54 voted against the second stopgap bill. In other words, Boehner will have to stitch together a bipartisan coalition of House Democrats just to clear the bill, giving Senate Democratic negotiators more clout in shaping the underlying spending cuts.

More broadly, House GOP leaders appear willing-some might say eager-to turn the page and direct the conference's attention to cutting spending in this year's budget cycle and passing a budget resolution that meets its vow to significantly reduce entitlement spending. It's no coincidence that Budget Committee Chairman Paul Ryan, R-Wis., will unveil his plan to reduce future Medicaid and Medicare spending next Tuesday.

The other unresolved issue is on controversial policy riders. The big items: defunding the 2010 health care reform law, preventing funds for EPA regulation of greenhouse-gas emissions, and eliminating funding for Planned Parenthood and the Corporation for Public Broadcasting, will be left to Boehner, Senate Majority Leader Harry Reid, D-Nev., and the White House.

Top House GOP aides say the price for killing the toughest GOP riders will be more spending cuts. It's unclear if Republicans will succeed in leveraging policy concessions this way. Senate Democrats are adamant about protecting Planned Parenthood funding (and some moderate Senate Republicans have reservations about that policy, too), funds for CPB, and federal aid to poor women and children. Senate Democrats also intend to push for defense cuts, something that could irk House Republicans and torpedo a final compromise.

In other words, it appears the White House, Boehner, and Reid possess the desire to avoid a government shutdown. They have now set in motion a negotiating process to turn that desire into a durable legislative product. What's unclear is the will among rank-and-file Republicans and Democrats to settle differences and accept half a loaf.

Boehner and Reid and the White House know this is the first of many budget fights, the under-card if you will, for marquee fights over the future of Medicare and Medicaid funding and the entire 2012 discretionary budget. From Boehner's perspective, obtaining $33 billion in cuts from President Obama with barely a whimper of protest constitutes a big victory. But he can't sell it to his conference-not entirely, at least. And that means it's going to have to be a "bipartisan" victory, one that tea party-inspired Republicans are likely to find distasteful if not repellent.

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