Sen Kent Conrad (D-ND), Chairman of the Senate Budget Commitee, is expected to address Senate Democrats on Wednesday about using the deficit reduction commission's recommendations -- including entitlement reform -- as the basis for a a compromise on reducing the federal deficit. Republican leaders in the Senate signalled a willingness to talk, although Minority Leader Mitch McConnell (R-TN) demanded leadership on the issue from the President, and warned against using any tax increases to fund the compromise.  (The commission proposed reducing rates, but also eliminated deductions and credits; the net result was expected to be a tax increase.)

At the same time, House Republicans are releasing details on their proposal to cut federal spending in the current year by $32 billion. However, that includes a $9 billion increase in defense spending which means non-defense spending is facing $41 billion in cuts.  Conrad called the House Republican proposal "small potatoes", and is looking for a long term deal that keeps spending at current levels until the economy recovers.