“Amid a global fright over Washington’s political brinkmanship, U.S. lawmakers return to the capital on Tuesday with a seven-week deadline to reach agreement on scheduled tax hikes and budget cuts that threaten to trigger another recession,” Reuters reports.

“The post-election battle over the so-called fiscal cliff is shaping up as an extension of the political campaign with Democrats trying to rally support for raising taxes on the wealthy as part of any deal, and Republicans countering that such an approach would devastate ‘job creators’ across the country.”

Wonk Wire: Will 2016 hopefuls sink a grand bargain on the nation’s debt?

Wonk Wire sees signs the GOP might be willing to bargain in order to avoid going over the “fiscal cliff.”

As President Obama begins budget talks to avoid the fiscal cliff, the New York Times notes he “will not simply hunker down there for weeks of closed-door negotiations as he did in mid-2011, when partisan brinkmanship over raising the nation’s debt limit damaged the economy and his political standing. He will travel beyond the Beltway at times to rally public support for a deficit-cutting accord that mixes tax increases on the wealthy with spending cuts.”

Wonk Wire: What is the fiscal cliff anyway?

Weekly Standard editor Bill Kristol urged the Republican Party to accept new ideas, “including the much-criticized suggestion by Democrats that taxes be allowed to go up on the wealthy,” the Huffington Post reports.

Said Kristol: “It won’t kill the country if we raise taxes a little bit on millionaires. It really won’t, I don’t think. I don’t really understand why Republicans don’t take Obama’s offer.”

He added: “Really? The Republican Party is going to fall on its sword to defend a bunch of millionaires, half of whom voted Democratic and half of whom live in Hollywood and are hostile?”

“The federal budget deficit has topped $1
trillion for a fourth straight year. But the deficit for the just-ended
2012 budget year is $207 billion less than last year,” the AP reports.

Politico: “Leaders on both sides of the dome, in both parties, are meeting with key Obama administration officials… quietly mulling different legislative strategies to avoid massive tax hikes on all Americans. At the same time, lawmakers are beginning to carve out positions for their parties for what will become a months-long rhetorical and legislative war leading up to a series of year-end deadlines.”

Ryan Lizza has a fantastic profile of Rep. Paul Ryan (R-WI).

“Ryan’s long-range plan was straightforward: to create a detailed alternative to Obama’s budget and persuade his party to embrace it. He would start in 2009 and 2010 with House Republicans, the most conservative bloc in the Party. Then, in the months before the Presidential primaries, he would focus on the G.O.P. candidates. If the plan worked, by the fall of 2012 Obama’s opponent would be running on Paul Ryan’s ideas, and in 2013 a new Republican President would be signing them into law.”

“Sitting in his office more than three years ago, Ryan could not have foreseen how successful his crusade to reinvent the Republican Party would be… To envisage what Republicans would do if they win in November, the person to understand is not necessarily Romney, who has been a policy cipher all his public life. The person to understand is Paul Ryan.”

A new GAO study finds the 2011 debt ceiling fight in Congress cost the federal government about $1.3 billion in extra borrowing costs.

Huffington Post: “And that’s just the costs that the GAO bothered to count. There are also probably extra borrowing costs that the government is still paying this year and in future years because of the debt-ceiling debacle, but the GAO’s computer was too tired and/or depressed to try to figure those out.”

In the mail: Red Ink: Inside the High-Stakes Politics of the Federal Budget by David Wessel.

New York Times: “Senate Democrats — holding firm against extending tax cuts for the rich — are proposing a novel way to circumvent the Republican pledge not to vote for any tax increase: Allow all the tax cuts to expire Jan. 1, then vote on a tax cut for the middle class shortly thereafter.”

“The proposal illustrates the lengths lawmakers are going to in an effort to include new federal revenues in a fix for the ‘fiscal cliff,’ the reckoning in January that would come when all Bush-era tax cuts expire and automatic spending cuts to military and domestic programs kick in.”

Bloomberg: The perils of the coming U.S. fiscal cliff.

A new Pew Research poll finds that by two-to-one (44% to 22%), the public says that raising taxes on incomes above $250,00o would help the economy rather than hurt it, while 24% say this would not make a difference.

Moreover, an identical percentage (44%) says a tax increase on higher incomes would make the tax system more fair, while just 21% say it would make the system less fair.

Democrats are “making increasingly explicit threats about their willingness to let nearly $600 billion worth of tax hikes and spending cuts take effect in January unless Republicans drop their opposition to higher taxes for the nation’s wealthiest households,” the Washington Post reports.

“Emboldened by signs that GOP resistance to new taxes may be weakening, senior Democrats say they are prepared to weather a fiscal event that could plunge the nation back into recession if the new year arrives without an acceptable compromise.”

Politico: “The Democratic hard line — asserted by Obama at a private Oval Office meeting with senior party leaders last week — is based squarely on the belief that Republicans will cave on taxes because the GOP has far less leverage than it did after its resounding success in the 2010 elections.”

Wonk Wire: It’s time for workable solutions for the fiscal cliff.

“The rigidity of those pledges is something I don’t like. The circumstances change and you can’t be wedded to some formula by Grover Norquist. It’s — who the hell is Grover Norquist, anyway?”

— Former President George H.W. Bush, in an interview in Parade, on Grover Norquist’s “no new tax” pledge.

A new United Technologies/National Journal Poll shows that only 26% of the public wants to see all of the Bush tax breaks extended for at least another year. And only 18% want the tax breaks across all income levels made permanent, the position taken by Mitt Romney. 

Former White House chief of staff Erskine Bowles and former Sen. Alan Simpson “are working with a bipartisan group of 47 Senators and as many House members to frame a compromise on $7 trillion in looming fiscal decisions,” Reuters reports.

“Without a deal, the end of the year brings higher taxes for most Americans with the expiration of historically low income tax rates enjoyed by nearly every American and expiry of a payroll tax break, along with broad automatic spending cuts that most lawmakers in both parties want to avoid.”

Said Bowles: “I believe this group will come together during the lame duck.”

House Republican leaders “unveiled a legislative calendar for the summer, revealing plans to hammer President Obama and Democrats on the economy, energy, taxes and other divisive issues in the months leading up to November’s elections,” The Hill reports.

The schedule includes a July vote to extend the Bush-era tax rates for all Americans.

“Do not buy into the BS that you hear.”

— White House press secretary Jay Carney, quoted by The Hill, saying it was “a sign of sloth and laziness” that reporters bought into the GOP idea that federal spending increased dramatically under President Obama.

Wonk Wire: The spending spree that never happened.

In the mail: It’s Even Worse Than it Looks by Thomas Mann and Norman Ornstein.

The book identifies the two scourges most responsible for our dysfunctional government: the polarization between two adversarial political parties and a governing system that makes it very difficult for majorities to act. This is coupled with an “escalating extremism” of the Republican party.

Perhaps most important, the authors note that several popular “cures” for our nation’s problems — a balanced budget amendment and term limits — would only exacerbate the gridlock.