Lawmakers return to Washington with a hint of compromise in the air

WASHINGTON - With a new start, optimism reigns.

Lawmakers returned Tuesday with a looming deadline to head off massive federal budget cuts and tax increases, but for the first time in months there was a widespread feeling that compromises are within reach to untangle long-standing legislative knots.

"I think the American people have both an expectation that we'll work together," U.S. Sen. Bob Casey (D., Pa.) said, "but also an expectation that it's going to take a few weeks to get to an agreement."

Every Philadelphia-area lawmaker interviewed said he believed an agreement was possible. One Republican said President Obama had a chance to shape his legacy.

"I really believe this is a 'Nixon goes to China' opportunity for the president," said U.S. Rep. Pat Meehan (R., Pa.). "The extent to which he uses this to lead to a route to a meaningful resolution could well define his presidency."

The public negotiations began immediately after the election, when Obama and Republican House Speaker John Boehner made overtures of cooperation. But any agreement will eventually need the support of rank-and-file members of the Senate and House, where bipartisan deal making and deliberation were scarce in the months before Election Day.

Lawmakers plan to meet with their party caucuses Wednesday morning, giving leaders a first chance to gauge members' moods and see where compromise might be possible and which roadblocks remain.

"The outlines of at least the discussion on our side will start to shape," Casey said.

The president and congressional leaders are seeking a deal to reduce the deficit and avoid $500 billion of tax increases and automatic spending cuts known together as the fiscal cliff. The tax increases, due to expiring laws, along with automatic spending reductions that were part of an earlier deficit deal, are to take effect together at year's end, which could jolt the nation back into recession as people pay more and government scales back spending, analysts warn.

Nearly 90 percent of American households would see taxes rise by an average of $3,500, according to the nonpartisan Tax Policy Center, and budget cuts would hit programs popular and unpopular alike.

For months before Election Day, the Senate and House went through the motions of debating bills, focused more on scoring points for campaign purposes than any belief that their plans would become law.

The end of election season, lawmakers said, presents a new opening.

"There is an opportunity here for the moment where there might be some reconciliation across these very hard lines that have dominated the past two years," Sen. Chris Coons (D., Del.) said.

U.S. Rep. Frank Pallone (D., N.J.) said: "There seems to be a sense of working together that's definitely different from before the election. I think both sides of the aisle feel that we've got to get this done."

The biggest initial debate centers on taxes. Obama campaigned on letting tax cuts for high earners - those making $250,000 and more - expire, raising their rates back to previous levels. Democrats argue that the wealthy need to pay more to help balance the federal budget.

"I don't think there's any possibility that the president is going to compromise on that issue," U.S. Rep. Chaka Fattah (D., Pa.) predicted. "We will find an agreement, but it's probably going to be on the president's terms."

Republicans contend that new revenue can come through reducing deductions for high-income taxpayers, not rate hikes. It's a critical divide.

U.S. Sen. Pat Toomey (R., Pa.) said raising marginal tax rates or increasing taxes on dividends and capital gains would only hurt the economy.

"If we raise taxes on capital, then we'll have less growth and fewer jobs," Toomey said. Key Republicans including Senate Minority Leader Mitch McConnell - whose caucus has the numbers to filibuster any deal - have taken a similar stand.

Some Democrats, meanwhile, have dug in on programs such as Social Security, Medicare, and Medicaid. Republicans want to reduce the costs of those programs as part of any bargain.

U.S. Rep. Bob Brady (D., Pa.) rallied with labor unions last week to oppose any cuts to the programs, a stance Pallone echoed Tuesday, saying, "We shouldn't be cutting the safety net."

Members of both parties said Obama will be the driving force. Toomey, Meehan, and other Republicans said it's up to him to lead - to propose solutions and bring the sides together.

But the president's Nov. 6 victory over Republican Mitt Romney means the GOP should be prepared to give ground, said U.S. Rep. Robert E. Andrews (D., N.J.).

"The political reality is, the president won," Andrews said. "The president very explicitly campaigned that the very wealthy should pay their fair share."

There are hopes that the framework of a far-reaching deal on spending cuts and taxes, enough to delay the fiscal cliff, could be achieved by year's end, but several lawmakers said the details would be so complex that the finishing touches would have to wait for next year.

In the event that no deal is struck, a bill could simply delay the impact of the cliff but leave lingering uncertainty about the government's ability to control its own budget.

On Friday Obama is scheduled to meet with both chambers' leaders.

Lawmakers leave Washington again for Thanksgiving week, then return, to see if optimism translates into action.