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Following a meeting with President Obama, Senate leaders said Friday they intend to hammer out a plan that would avoid the fiscal cliff and present it to their caucuses on Sunday. But it remains unclear whether the last-minute package will delay or void pending military spending cuts.
Though lawmakers did not directly address whether the deal they are pursuing will delay a pending $500 billion cut to planned Pentagon spending, Obama seemed to indicate at least delaying them is a strong possibility.
With talks on avoiding fiscal calamity — including deep defense and domestic spending cuts -- nearly stalled this week, hope for a deal suddenly began to flicker Friday. Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Kent., took to the Senate floor following an hour-long meeting with Obama in the Oval Office to sound an optimistic -- and determined — tone.
In an address from the White House briefing room as afternoon faded into evening on a cold day in Washington, Obama said "I still want to get this done," adding "the hour for immediate action is here." …
The president characterized the meeting as "good and constructive," saying he is "optimistic that we may still by able to reach an agreement." In his remarks, notably, Obama referenced only the need to extend George W. Bush-era middle class tax cuts and unemployment insurance to avoid economic catastrophe.
Reid and McConnell indicated they would immediately begin working on an eleventh-hour deal, but neither mentioned the pending cuts to planned defense and domestic spending.
"We had a good meeting down at the White House. We are engaged in discussions, [Reid] and myself and the White House, in hope that we can come forward as early as Sunday and have a recommendation that I can make to my conference and [Reid] can make to his conference," McConnell said on the Senate floor. "So we'll be working hard to try to see if we can get there in the next 24 hours."
The Senate GOP leader said he is "hopeful and optimistic."
In his remarks on the floor, Reid said he hopes to bring the upper chamber into session around 1 p.m. on Sunday, with an unrelated vote slated for 2 p.m. After those votes are complete, Reid said the two parties likely would head into separate caucus meetings to discuss whatever fiscal cliff/sequestration-avoidance plan the two and their staffs hammer out between Friday evening and Sunday afternoon.
As for crafting a plan to reflect the still-unclear contents of the White House meeting, Reid said "it shouldn't take a long time to do that." Reid added he believes "it would be to everyone's interest if we were not in session [Saturday]."
"I do think we need that time to have everybody step back a little bit. If we come up with something, it's not that easy," Reid said. "We're dealing with big numbers, and some of the stuff we do is somewhat complicated."
But if either the Senate GOP or Democratic caucus — or both — reject the coming legislation, Obama said he has "asked" Reid to bring to a vote another bill extending middle class tax cuts, ensuring unemployments are not cut offs, and that lays the foundation for future fiscal reform.
That last part could well mean the bill would delay some — or all — of the pending cuts to projected federal spending.
"That shouldn't be too hard because both Republicans and Democrats say they don't want taxes to go up on the middle class," Obama said.
As for the Oval Office meeting, Reid called it "positive" and said "there was not a lot of hilarity in the meeting." Reid cautioned the coming plan "is going to be imperfect" and "some people aren't going to like it. Some people will like it less."
Reid said Obama made clear that "we have an obligation to do the best we can."
"We're going to do the best we can for the caucuses that we have and the country that's waiting for us to make a decision," Reid said.
The Defense Department will likely have its budget cut regardless -- but the question remains how much, some sources and analysts say.
Senior defense officials have said they could absorb some spending cuts without a major impact on the almost year-old DoD military strategy.
It is believed DoD could weather a $10 billion per-year cut — or at least $100 billion over the next decade — without a major impact, according to senior officials.
That, these officials say, would be much more manageable than sequestration, which calls for those $500 billion in cuts over the next decade.
Those cuts amount to about $50 billion per year, but the 2013 hit would be around $63 billion.
Deficit reduction deals offered up in recent weeks to avert the so-called "fiscal cliff" — the combination of tax increase and sequestration — have included defense cuts, according to congressional sources.
The president is said to have offered $100 billion in national security reduction over the next decade, which tracks with figures DoD officials have said the department could absorb.
If sequestration is triggered on Jan. 2, all DoD spending accounts, except military personnel, would be reduced by 10 percent.
If that happens, defense officials, including Comptroller Robert Hale, have said that could mean widespread furloughs of DoD civilian workers to pay for other activities, such as fully funding operations in Afghanistan.
In a memo to the DoD employees last week, Defense Secretary Leon Panetta said Pentagon officials "will carefully examine other options to reduce costs" before ordering furloughs.
If sequestration goes into effect, the impact would not likely be immediate.
"I do not expect our day-to-day operations to change dramatically on or immediately after January 2, 2013, should sequestration occur," Panetta said in the Dec. 20 memo.
Earlier this month, a senior defense official hoped for flexibility, should DoD have to make sequestration cuts. The official said cuts to budget accounts, such as aircraft procurement, would be more manageable under sequestration.
That method would allow DoD to pick and choose individual weapons programs to protect.
But that is not likely, according to defense experts and analysts.