Backing down from their hard-line stance, House Republicans said Friday that they would agree to lift the federal government’s statutory borrowing limit for three months, with a requirement that both chambers of Congress pass a budget in that time to clear the way for negotiations on long-term deficit reduction.

The new proposal, which came out of closed-door party negotiations at a retreat in Williamsburg, Va., seemed to significantly reduce the threat of a default by the federal government in coming weeks. The White House press secretary, Jay Carney, said he was encouraged by the offer; Senate Democrats, while bristling at the demand for a budget, were also reassured and viewed it as a de-escalation of the debt fight.

The change in tack represented a retreat for House Republicans, who were increasingly isolated in their refusal to lift the debt ceiling. Speaker John A. Boehner of Ohio had previously said he would raise it only if it were paired with immediate spending cuts of equivalent value. The new strategy is designed to start a more orderly negotiation with President Obama and Senate Democrats on ways to shrink the trillion-dollar deficit.

To add muscle to their efforts to bring Senate Democrats to the table, House Republicans will include a provision in the debt ceiling legislation that says lawmakers will not be paid if they do not pass a budget blueprint, though questions have been raised whether that provision is constitutional.

That “no budget, no pay” provision offered Republicans a face-saving way out of a corner they had painted themselves into — and an effort to shift blame for any default onto the Senate if it balks. The House Republicans’ campaign arm quickly moved from taunting Democrats about raising the government’s borrowing limit to demanding that they sacrifice their paychecks if they fail to pass a budget.

“The Democratic-controlled Senate has failed to pass a budget for four years. That is a shameful run that needs to end, this year,” Mr. Boehner said in a statement from Williamsburg. “We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government’s spending problem.”

House Democrats met the deal with scorn, indicating they would inflict maximum political pain by making Republicans either break a campaign promise to carry it to passage or defy their leaders. But other Democrats were more sanguine. The president had said he would not sign a short-term debt ceiling increase, but a senior administration official said that as long as there were no surprises, the White House was likely to accept the House’s offer. Most important, the official said, Republicans had broken from the “Boehner rule” imposed in 2011: any debt ceiling increase was to include a dollar-for-dollar spending reduction.

The decision represents a victory — at least for now — for Mr. Obama, who has said for months that he will not negotiate budget cuts under the threat of a debt default. By punting that threat into the spring, budget negotiations instead will center on two earlier points of leverage: March 1, when $1 trillion in across-the-board military and domestic cuts are set to begin, and March 27, when a stopgap law financing the government will expire.

Reordering the sequences of those hurdles was central to the delicate Republican deliberations that resulted in the new plan. In the days leading to the Williamsburg retreat, Representative Paul D. Ryan of Wisconsin, the House Budget Committee chairman and former vice-presidential nominee, had been meeting with the leader and three past chairmen of the conservative House Republican Study Committee to discuss a way through the debt ceiling morass.

Those conversations led into Thursday morning, when Mr. Boehner and Representative Eric Cantor of Virginia, the No. 2 House Republican, opened the retreat by going through the timeline for the coming budget fights, according to aides who were there.

They turned the floor over to Representative Dave Camp of Michigan, the House Ways and Means chairman, who delivered a blow-by-blow description of the economic disaster that could be wrought by a government default. Mr. Camp also talked through the notion held by some Republicans that the Treasury Department could manage a debt ceiling breach by channeling the daily in-flow of tax dollars to the most pressing needs, paying government creditors, sending out Social Security checks and financing the military. His message was that it would not work, the aides said.

Then Mr. Ryan stood to talk over the options he had developed with the House conservative leaders. They could do a longer-term debt ceiling extension with specific demands, like convertingMedicare into a voucherlike program. Or they could lower expectations, reorder the budget hurdles with a three-month punt, and add the “no budget, no pay” provision.

Persuading Republicans who adamantly oppose raising the debt ceiling took some time, and the ensuing discussion stretched on and on, breaking at noon for lunch on Thursday, resuming at 2:30, until 4 p.m., then concluding Friday.

Representative Kevin McCarthy of California, the House majority whip, met with freshmen early Friday to make sure they were on board. Mr. Boehner and Mr. Cantor joined Mr. Ryan for one last meeting with conservative leaders — Representatives Steve Scalise of Louisiana, Jim Jordan of Ohio, Jeb Hensarling of Texas and Tom Price of Georgia — to make sure they were on board. Then the top four leaders sealed the agreement midmorning.

Mr. Obama will unveil his own 10-year budget plan in February, laying out his tax and spending plans for his second term. But Senate Democrats, for the past four years, have refused to move a budget blueprint to the Senate floor, in violation of the Budget Act of 1974, which laid out new rules for controlling deficits.

For the past two years, House Republicans have approved sweeping budget plans that would fundamentally remake Medicare and Medicaid, sharply reduce domestic spending, increase military spending and order a wholesale rewriting of the federal tax code. But without Senate negotiating partners, those plans, written by Mr. Ryan, have been more political statement than legislative program.

“This is the first step to get on the right track, reduce our deficit and get focused on creating better living conditions for our families and children,” Mr. Cantor said. “It’s time to come together and get to work.”

Ashley Parker contributed reporting from Williamsburg, Va.

The fiscal cliff debacle showed conclusively that the GOP establishment is a completely ineffective guardian of our liberties against President Obama and the Washington ruling class. Forget fantasies about reversing the growth of the state, let alone stopping such growth; Boehner’s boys can’t even slow it down.

The fight over the debt ceiling is shaping up to be more of the same. This week, Obama announced that he is not going to negotiate over the debt ceiling. Republicans are in shock, but the rest of the country is in shock that the Republicans are in shock. What did they expect? They’ve caved in every time so far, which means that they will cave in the next time, and the President knows it.

The deal which Congress struck with the President in order to avoid the alleged horrors of the fiscal cliff is basically a fiscal cave, in which the opposition party caved in on pretty much every issue except one tiny detail about what the income threshold would be for the highest tax rate. The GOP almost broke its collective arm patting itself on the back, but the folks back at home intuitively sense that the Fiscal Cave is much worse than the fiscal cliff that it was designed to avoid.

For example, the fiscal cliff had built-in spending cuts; the cave has no spending cuts at all. I believe that an obsessive focus on deficit control is a distraction from the central problem, which is excessive government spending. But let us grant for the moment the premise around which the issue was framed: that deficit control is the main objective. The fiscal cliff package actually might have had some chance of diminishing deficits by raising taxes on the middle class, the only group big enough to materially affect tax revenues. But the fiscal cave will only worsen deficits by causing economic stagnation which is a long term deficit growth driver, while doing nothing about spending.

Even worse, the fiscal cave leaves us with an extremely progressive income tax. International groups such as the OECD had already pointed out that the U.S. already had what was probably the most steeply rising progressivity of tax rates of any modern nation. Even the New York Times ran an article expressing concern about the problem. But that was before the Fiscal Cave, which left the Bush tax cuts in effect for the lower and middle class, but raised them for the upper bracket, steepening the progressivity even further.

High progressivity is poison for growth because it kills the incentive for self-improvement. It institutionalizes envy in our tax code and places a punishing ceiling above the heads of people who otherwise would have been ready to make the move from upper middle class into affluence. Furthermore, it reveals the heart of our political class, who insisted on these changes with absolute unbendable firmness, while acknowledging that these tax hikes would bring in statistically negligible quantities of new revenues. Affluent investors, entrepreneurs and earners had one role and one role only to play in the recent fiscal fight – the role of target.

This is not just true in the United States. Indeed, most of the welfare states of the developed world have scapegoated the wealthy. Nations from the United Kingdom to Japan and everywhere in between have adopted some form of ‘austerity’ and raised taxes on the middle class, but more so on the wealthy. They have acknowledged that the tax hikes on the wealthy have been for ‘fairness’ or to ‘share the pain’, etc. But the U.S. isn’t calling upon the wealthy to share the income tax hike pain; they’ve demanded that they bear it alone.

In this way, Washington’s new plan differs from every austerity program I’ve ever seen, by turning our tax code, which already had the most punishing step-ups in rates for anyone trying to rise from middle class to upper class, into one with an extra dose of pain for the wealthy just for fun. This is a flashing neon sign for anyone who has eyes to see, and says “Wealthy Not Welcome.”

Could any sensible person believe that this is all over, that the War on the Wealthy was won by Obama & Co. at the Battle of Fiscal Cliff, and that they will accept their victory and go home? Can any sensible person believe that our Republican and ‘conservative’ establishment could protect the affluent class even if they wanted to? I for one, would like to see what would happen if they tried. I’d like to see what would happen if the GOP stood up, and without flinch or floundering, defended the morality of wealth creation and forthrightly decried the immorality of socialism in all its forms. They might lose; the country might reject the Party’s arguments, but America deserves a real choice explained in clear terms. If we give them truth straight up and they reject it, then it’s on them. But if we muffle it or fudge it or offer them an echo, not a choice, then it’s on us.

The Defense Department “Sequester” – a budget gimmick originally described as “ridiculous” by Harry  Reid and the President’s Chief of Staff – has become a Gordian Knot that the White House and  Congress have so far failed to unravel. Originally scheduled to be force implemented on January 1,  2013, it escaped solution during the New Year’s Eve fiscal cliff fiasco. Instead, the problem was just  kicked down the road a few more weeks with a new drop-dead date of March 1.

Rather than providing relief, the legislative inaction accentuates uncertainty and compresses even  further the time frame in which the Pentagon would be forced to implement $45 billion of immediate  cuts and $500 billion over the longer term.

It’s no way to run an Army…or Navy, Air Force, Marines, and Coast Guard for that matter.  Last May, Secretary of Defense Leon Panetta warned that the $500 billion of DoD cuts would be  “disastrous” to national security, hoping to get the attention of Congress and the White House for a  timely solution. Eight months later, the Pentagon is still waiting.

On Thursday, Panetta and the Chairman of the Joint Chiefs of Staff General Martin Dempsey  provided an ominous assessment of the consequences of inaction. Below are some key excerpts  from the briefing and a link to an expanded Politico.com report.

No one seems to like or be willing to take responsibility for the sequester. But neither has anyone  figured out how to avoid it.

During the third Presidential debate on October 22, 2012 Barack Obama lied when he said, “The  sequester is not something that I’ve proposed. It is something that Congress has proposed.” But, as  Bob Woodward documented in “The Price of Politics” the idea came right out of the White House.

Further, Jack Lew, President Obama’s Chief-of-Staff who yesterday was nominated to be the next  Treasury Secretary, is “credited” with selling the sequester idea to Harry Reid on behalf of the White  House. Reid originally called the idea “ridiculous” when Lew and White House Legislative Affairs  Director Rob Nabors first introduced it to him. “That’s the beauty of a sequester, they (Lew and  Nabors) said, it’s so ridiculous that no one ever wants it to happen,” according to the account of  events in Woodward’s book. Reid then said, “I get it.”

Now the ridiculous is threatening military preparedness and national security to the point that Obama’s  own Sec-Def says “we have no idea what in the hell is going to happen.”

Apparently, when you’re responsible for selling a really bad idea to Congress on behalf of the Obama  Administration you get promoted instead of fired.

Following are key excerpts from Politico.com. Full report available here.

Defense Secretary Leon Panetta said Thursday he has ordered the Pentagon to begin planning  now for the triple crisis facing the government this March, telling reporters it was a “perfect storm”  that could leave the military with a worst-case outcome: a “hollow force.”

Panetta and the nation’s top uniformed officer, Joint Chiefs Chairman Gen. Martin Dempsey, said in  a briefing that March’s potential across-the-board budget cuts, the expiration of the continuing  spending resolution that now pays for the government and the potential that the U.S. could default  on its debt all were too serious not to begin immediate preparations.

“The fact is, looking at all three of those, we have no idea what the hell’s going to happen,” Panetta  told reporters at the Pentagon. “All told this uncertainty, if left unresolved by the Congress, will  seriously harm our military readiness.”….

“I’d like to believe that ultimately, Congress will do the right thing,” Panetta said. Now, however, “my  fear in talking to members of Congress is that this issue may now be in a very difficult place in terms  of their willingness to confront what needs to be done to de-trigger sequester. So all those reasons,  plus the uncertainty about what happen on the CR, the debt ceiling, put all that together, and we  simply cannot sit back now and not be prepared for the worst.”….

(Joint Chiefs Chairman Gen. Martin Dempsey said,) “If we’re required to do these cuts, suddenly  we’ve got to achieve these levels of savings, how do you protect the war-fighters, those involved in  Afghanistan, those areas that are critical to our national defense? So where do you go? You go to  readiness, you go to maintenance, training, this is where the cuts are ultimately made, and when  that happens, it make us less ready.”

The White House says it is not minting a “$1 trillion coin,” and it is not negotiating with congressional Republicans on raising the debt ceiling.

“There are only two options to deal with the debt limit,” said White House spokesman Jay Carney. “Congress can pay its bills or it can fail to act and put the nation into default.”

Whether Republicans agree with that analysis remains to be seen.

Some congressional Republicans say they will not support an increase in the soon-to-expire $16.4 trillion debt ceiling unless there are corresponding cuts in federal spending.

The debt ceiling enables the government to borrow money to pay that debts that have already been incurred.

Carney issued a statement after the Treasury Department announced Saturday it would not seek to get around the debt ceiling by minting a so-called “trillion-dollar platinum coin” to finance the nation’s existing debts.

Echoing comments President Obama has made, Carney referenced the 2011 dispute over the debt ceiling that led to a near-default and a downgrade in the U.S. credit rating.

“When Congressional Republicans played politics with this issue last time, putting us at the edge of default, it was a blow to our economic recovery,” Carney said. “The president and the American people won’t tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy.

“Congress needs to do its job.”

The debt ceiling is one of several budget challenges facing the White House and Congress in the months ahead.

They are still trying to negotiate a long-term debt reduction deal in order to head off a series of automatic budget cuts set to take effect in early March. This “sequester” — affecting popular domestic and defense programs — was deferred during the recent “fiscal cliff” deal, which dealt with taxes.

Also on the short term agenda: The March 27 expiration of the continuing resolution that is funding the government, creating the possibility of another government shutdown.

Our number one fiscal problem is an excessive burden of government spending. A big part of the solution is entitlement reform.

Our number two fiscal problem is a punitive and corrupt tax code (as captured by images here, here, and here). A big part of the solution is a simple and fair flat tax.

So what do you think happened when the clowns in Washington were forced to address these issues because of the fiscal cliff? To nobody’s surprise, they were missing-in-action on the first problem and they made the second problem worse. Obama got a class-warfare tax hike and nothing was done to control government spending.

This was a defeat, but it’s not the end of the world. Indeed, it could be the trigger for a renewed campaign for fiscal responsibility.

Here’s some of what I wrote for the Daily Caller, beginning with my assessment that Obama had all the advantages going into the fight over the fiscal cliff.

President Obama entered the battle in a very strong position. A big tax increase automatically was going to happen even if he did nothing, so he was holding all the cards. He could — and did — tell Republicans that they had an unpleasant choice of either accepting that big automatic tax increase or acquiescing to his class-warfare plan. No wonder Republicans have been acting so discombobulated. They had no winning strategy.

And because of this unpalatable situation, I wrote that “I’m not overly upset with Republicans.” There was no way of denying Obama some sort of tax hike.

But they do deserve some blame, at least if they were in office last decade.

I am upset with many of them, however, because they were in office during the Bush years and they voted for much of the wasteful spending that helped create the current fiscal mess. Many GOPers beat their chests about being against tax hikes, but that’s not a very credible or sustainable position when they’re also voting for the no-bureaucrat-left-behind education bill, the corrupt farm bills, the pork-filled transportation bills, the prescription drug entitlement, the TARP bailout, and the 2008 faux stimulus.

As I explained last month, we would be in much stronger fiscal shape if lawmakers had merely restrained spending over the past 10-plus years so that it “only” grew to keep pace with inflation and population growth.

But we can’t undo the past. The real issue is whether we can make progress in the future. Are there strategies that might restrain Leviathan?

Fortunately, the answer is yes.

In the article, I point out that Republicans “have several opportunities in the next few months to show whether they’re on the side of taxpayers.” The key is to pick battles that are winnable. Here are three fights that they can win for the simple reason that nothing can happen without approval of the House of Representatives.

1. In my dream world, I argue that they should “block any disaster funding for New York, New Jersey, and other states affected by Hurricane Sandy.” But I realize that’s an impossible demand because so many people now mistakenly assume the federal government should be in charge of this state and local responsibility. So, instead, they should draw a line in the sand and say the measure won’t be approved unless lawmakers “cut out the billions of extraneous pork that’s been added to the bill.”

This is not a trivial issue. Check out these reports from Townhall and the Weekly Standard to see how politicians have larded the legislation with handouts that have nothing to do with hurricane-related damage. Fiscally responsible lawmakers can make appropriate economic arguments against this pork, but they also can grab the moral high ground and denounce the way special interests and their Capitol Hill lackeys are trying to exploit a tragedy.

2. Another good opportunity is the debt limit. Proponents of smaller government should “insist on some long-overdue process reform as part of an increase” in the federal government’s borrowing authority. In the article, I specifically suggest they look at Congressman Brady’s MAP Act, which “imposes a spending cap modeled after the very successful Swiss Debt Brake.”

But even though I’m a huge fan of Switzerland’s spending cap, it’s important to recognize that the debt limit is a two-edged sword. Geithner, Bernanke, and other defenders of the status quo doubtlessly will engage in a lot of reckless demagoguery, falsely asserting that fiscal conservatives could provoke a default if they don’t give Obama a blank check.

3. This is why I think the ideal place to take a stand is the looming fight over the “continuing resolution.” Ignoring budgetary jargon, all you need to know is that Washington’s spending authority expires at the end of March. This means “that the government no longer will have authority to spend money for the non-entitlement portions of the federal government.”

In the article, I argue that “…lawmakers should insist on genuine spending cuts. And if Obama balks, let him be the one to shut down useless and counterproductive bureaucracies such as the Department of Education and the Department of Housing and Urban Development.” The potential risk of this strategy is that voters will blame fiscal conservatives if there’s a government shutdown, but I explained in an article for National Review that this was a very successful strategy in the mid-1990s.

The only problem with these three ideas is that they can only succeed if Republicans genuinely want to fight for smaller government. And as we saw from votes on housing handouts, pork-barrel spending, and corporate welfare, the GOP oftentimes is part of the problem.

As President Obama and Democrats urge Republicans to increase taxes, liberals curiously invoke the name of Ronald Reagan, the ultimate tax-cutting Republican. They insist that even Reagan was willing to compromise with Democrats on tax increases; thus, John Boehner and Republicans should as well. In truth, this is (at best) a false parallel.

It is correct that Ronald Reagan occasionally compromised on certain tax increases, as he did in 1982. He did so in exchange for promised spending cuts from Democrats that (not surprisingly) never materialized, to his great regret. Reagan would constantly point back to this broken promise by Democrats.

More importantly, however, President Reagan never budged on income taxes. He flatly refused to increase income taxes, which is what President Obama demands of Republicans right now. Reagan understood that not all taxes, and thus not all tax increases, were equal.

For insight into Ronald Reagan’s thinking, consider what he did in 1981, when faced with a stagnant economy: At his California ranch on August 13, 1981, Reagan, working with a Democratic House and Republican Senate, secured a 25% across-the-board reduction in income tax rates over a three-year period beginning in October 1981. Eventually, through this and later cuts, the upper income-tax rate was slashed from 70% to 28%.

After a slow start through 1982-83, the stimulus effect of the tax cuts was extraordinary, sparking a huge peacetime economic expansion. The “Reagan Boom” produced not only prosperity but—along with the Soviet collapse that he worked to precipitate—helped generate budget surpluses in the 1990s.

And contrary to the history that liberals continue to rewrite, the Reagan tax cuts did not decrease the revenue to the U.S. Treasury. To the contrary, tax revenues under Reagan rose from $599 billion in 1981 to nearly $1 trillion in 1989. The problem was that outlays (i.e., government spending) all along exceeded revenues, soaring from $678 billion in 1981 to $1.143 trillion in 1989.

The cause of the Reagan deficits—bear in mind that Reagan inherited a chronic deficit—was the decline in revenue from the 1982-83 recession and (as is always the case) excessive federal spending.

Spending has long been, and still remains, the primary reason for our fiscal crisis. This has been especially true since the massive growth of the federal government begun in the 1960s by LBJ’s Great Society.

Proof of this is as easy as Googling the words “historical tables deficit.” You will see two go-to sources for budget data: “OMB historical tables” and “CBO historical tables.” “OMB” is Office of Management and Budget. “CBO” is Congressional Budget Office. To keep it simple, look at the data from OMB, President Obama’s own budget office. At the OMB link  is Table 1.1, “Summary of Receipts, Outlays, and Surpluses or Deficits: 1789-2016,” an official report of all federal spending since the founding of the republic.

A close read of that chart offers a stunning display in fiscal irresponsibility. As the first two columns show, receipts (i.e., revenues) and outlays (i.e., expenditures) moved up and down throughout the first roughly 180 years of our history. In 1965, however, something historically perverse began: Spending started increasing every single year, without exception, into the Obama presidency, from 1965-2009. A slight decrease came only in 2010, but then spending promptly ratcheted right back up, and remains on a steady upward trajectory through 2017.

There are few constants in the universe: gravity is one, the sun is another. Add another: spending by Washington; it goes up every year.

Worse, in 2009, President Obama and the Democratic Congress responded to the slow economy with a gigantic spending infusion: an $800-billion “stimulus” package that further exploded our record deficit/debt.

In short, this is why Republicans should not agree to Democrats’ demands for tax increases. This nation has a spending problem—a grave one—not a tax-revenue problem. Our problem today is reckless big government.

At his 1981 inaugural, Ronald Reagan, referring to the economic crisis he faced, declared that “government is not the solution … government is the problem.”

Just days after his inaugural, Barack Obama professed the opposite: “[A]t this particular moment, the federal government is the only entity left with the resources to jolt our economy back into life. It is only government that can break the vicious cycle where lost jobs lead to people spending less money which leads to even more layoffs.”

Barack Obama is the anti-Reagan.

To repeat: Ronald Reagan never budged on marginal income-tax rates. He decreased them, big-time. Barack Obama is demanding that they be increased. Ronald Reagan, we suspect, would be fully supportive of current Republicans holding their ground on tax rates—especially given our federal government’s unparalleled inability to control its reckless spending.