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Sequester II: Are we headed for yet another cliff?

Cutting billions from entitlements is unlikely to be hammered out in the few days before Christmas, leaving lawmakers with another, familiar option: Sequester I
An unidentified man dressed as Santa Claus speaks outside the U.S. Capitol before making his way to Speaker of the House John Boehner's office on December 12, 2012 in Washington, DC.  (Photo by Win McNamee/Getty Images)
An unidentified man dressed as Santa Claus speaks outside the U.S. Capitol before making his way to Speaker of the House John Boehner's office on December 12...

Cutting billions from entitlements is unlikely to be hammered out in the few days before Christmas, leaving lawmakers with another, familiar option: Sequester II, a second fiscal cliff.

While a deal on tax rates—or at least extending a tax cut for middle-class families—seems near, there isn’t enough time before the Dec. 31st deadline to rework the entitlements program. Entitlement reform is a major sticking point for Republicans, who say they’ll allow tax hikes if those funds are spent more wisely.

“In terms of entitlements, this is going to be a two-step deal, we’re going to have to have some sort of down-payment that gets us past the cliff, where we agree on the broader outlines in terms of what this program will look like,” Morning Joe economic analyst Steve Rattner explained on Thursday's show. “Then we’re going to be working well into next year in order to do the entitlements work, to do the tax work. One thing that hasn’t been figured out is the enforcement mechanism.”

Meet the Press’ David Gregory added that a second sequester, or batch of automatic cuts, is the most likely enforcement mechanism.

He expects Congress and the president will agree to extend middle-class tax cuts, put a temporary stay on the fiscal cliff, and then create the second cliff: “they’ll set up a framework where they’ll cut $600 billion out of the Medicare program, we’ll do it in 2013, the committees will be assigned and if they fail to come up with it, there will be a trigger that forces that amount of cut, so sort of a sequester two.”

This may well be the solution, Rattner adds, but they’re not going to like it.

“In terms of that back-end mechanism, it’ll be something like that but remember these guys hate the fiscal cliff and it’s caused this enormous problem, so the idea of setting up another fiscal cliff is pretty unappealing,” he said. “But they’re going to have to go there, they just haven’t figured out how.”