Sen. Charles Schumer speaks on the issue Tuesday. | M.Scott Mahaskey/POLITICO Senators position for fiscal debate

Sen. Chuck Schumer roiled the debate over the fiscal cliff Tuesday with a speech at the National Press Club. Sen. Max Baucus is huddling with European leaders on the issue this week. And Sen. Mark Warner is aligning himself with a well-funded outside group and the Senate’s gang of deficit busters to be a go-to guy in the debate.

There’s nothing on the table yet from anyone. But these moves illustrate the furious, power-driven scramble under way right now to shape the real negotiations on the nation’s fiscal future immediately after the election. It’s a drive to lay down markers on taxes, spending and deficit reduction before the real talks begin.


With the egos and interests of powerful senators, people are starting to step on — actually, stomp on — one another’s toes.

The so-called Gang of Eight met for dinner Tuesday evening at Warner’s home in Alexandria, the latest in a series of meetings to cut a bipartisan fiscal deal that could include a Tax Code overhaul similar to the one enacted in 1986.

But Schumer pre-empted them.

In his Tuesday speech, he argued that lawmakers in both parties should realize that circumstances have changed since 1986 and any revenue that is generated through changes to the tax system should reduce the deficit — not finance lower marginal rates, as the 1986 overhaul did.

“I hope they can revisit their approach to tax reform,” Schumer said in his speech. “It would be a huge mistake to take the dollars we gain from closing loopholes and put them into reducing rates for the highest income brackets rather than into reducing the deficit.”

Several Senate Democratic aides said Schumer’s speech put them in a firmer negotiating position ahead of the lame-duck session, when fiscal issues will take center stage. Democratic members of the Gang of Eight, however, were noticeably silent on Schumer’s remarks. Warner and Illinois Sen. Dick Durbin, the No. 2 Democrat in the chamber and Schumer’s rival in the leadership, wouldn’t say what they thought about the tax reform push.

And the White House doesn’t seem ready to engage in fiscal talks in any substantive way before the election. An Obama administration official didn’t fully endorse Schumer’s approach on taxes and instead said the speech made the point that “the wealthiest must pay their fair share in any balanced approach” to cut the deficit.

Baucus, chairman of the tax-writing Finance Committee, is taking a more back-channel approach.

He’s been in talks with Timothy Geithner, eating lunch with him at the Federal Reserve last week and dinner the week before at the Treasury secretary’s home, as well as speaking with him on weekly phone calls. He’s also been in touch recently with Federal Reserve Chairman Ben Bernanke as well as his friend and Republican counterpart in the House, Rep. Dave Camp of Michigan, who has the ear of Speaker John Boehner.

Schumer will undoubtedly try to influence Senate Majority Leader Harry Reid (D-Nev.) over his call to raise taxes on upper-income Americans in any debt deal. Reid — whose office didn’t comment on Schumer’s speech — could be tugged in another direction by Durbin, who has embraced a large-scale deficit deal that lowers income tax rates but raises revenues in other areas.

There are others lower on the congressional pecking order who are trying to force their way into the conversation. Sen. Bob Corker (R-Tenn.) is drafting a bill in the mold of the president’s deficit commission to call for a major deal on overhauling entitlements and raising revenue. Sen. Pat Toomey (R-Pa.) is preparing a bill that would slash marginal tax rates along the lines of what Mitt Romney is proposing.

Warner’s group is meeting at George Washington’s estate at Mount Vernon on Wednesday and Thursday to find a deal on the deficit. The “gang” — comprised mainly of rank-and-file senators from both parties, other than Durbin — realizes that this month could be its last best chance to remain relevant in the conversation if it can produce a deal to shape the lame-duck negotiations.

Republicans need Sen. Tom Coburn of Oklahoma, one of the key negotiators in the group, to take the lead on the plan in order to fend off attacks from the right over its goal to raise tax revenues, though it appears unlikely the group will reach a deal this week, several people familiar with the matter say.

If it can reach a deal, party leaders will be forced to take the bipartisan deficit-cutting accord seriously as they weigh how to deal with the looming tax hikes and spending cuts poised to do economic harm if Congress can’t resolve them.

“If you asked me how a compromise might ultimately emerge during the lame duck, I’d say their talks represent perhaps our best hopes right now to achieve a bipartisan deal,” Schumer said, even though he urged them to revise their thinking on taxes.

Behind the scenes, Warner has been urging business groups and trade associations to join an effort and contribute to the Fix the Debt campaign, a bipartisan coalition founded by Clinton White House chief of staff Erskine Bowles and former Wyoming GOP Sen. Alan Simpson, sources say. The group has already raised $32 million, sources say, but whether its ties to Warner will help him get a seat at the negotiating table remains to be seen.

“The policies that are going to fix this are now well known; the question is whether politicians are going to put them in place,” said Maya MacGuineas, a Washington budget expert who is leading the campaign. “We’re here to support any deal that’s big enough to fix the problem and done through a credible mix of policies.”

If the Gang of Eight can’t cut a deal, the members will certainly remain on the outside looking in because the final deal making ultimately will come down to Reid, Senate Minority Leader Mitch McConnell, Boehner, House Minority Leader Nancy Pelosi, Baucus and Camp.

And if President Barack Obama wins reelection, Geithner, White House chief of staff Jack Lew and Bernanke will be big players as well in a final deal.

But if Mitt Romney wins, most believe Congress will punt until next year in order to give him time to put his stamp on a sweeping deal to handle the $1.2 trillion in automatic spending cuts combined with the expiration of all the Bush-era tax rates — not to mention the expiration of the payroll tax break affecting 160 million American workers, the lapsed Medicare reimbursement fees for physicians and the raising of the national debt ceiling.

In an interview with POLITICO last weekend, Boehner seemed to believe that a large-scale deficit deal in a lame duck is unlikely, saying it’s “probably not appropriate” for retiring members to vote on major bills at the end of the year.

Durbin believes Congress should find a way to pay for the postponement of the scheduled tax hikes and spending cuts for six months and to use that time to put together a long-term deal — an idea Schumer seems resistant to. House Republicans are lobbying for a full-year punt on the tax increases and spending cuts and also want to use that time to find accord on a broader fiscal package.

Kelsey Snell contributed to this report.