“We need to create a fertile ground here in the Senate, in the House, to help him succeed,” says Alexander, who is talking with both parties behind the scenes to facilitate such an agreement. “Tax reform is at the top of the list of most Republican senators. Many of us feel that means broadening the base, closing the loopholes, and it could include more revenues. But for me, only if we have a plan to reduce mandatory spending.”

Despite the urgency from some Republicans, who want to buy time for a Mitt Romney administration, some lawmakers on the other side of the aisle such as Sen. John Kerry (D-Mass.) say an interim agreement is possible but unlikely. “I'm not going to say, 'No, under any circumstances,' but the likelihood is low,” Kerry says.

THE LAME DUCK If anything, Kerry and others fall into the lame-duck camp, saying that once lawmakers know who controls the White House, the Senate and the House, they will be free to act. But if Romney wins the presidency, Republicans would want to wait for him to take office before acting.

The other complicating factor in this scenario is the schedule, which will be anything but lame. In addition to dealing with sequestration during the last two months of the year, Congress will likely have to pass spending bills to keep the government running, deal with the expiration of the Bush tax cuts, other tax-extension issues and a major health care discussion.

With those constraints in mind, Sen. Carl Levin (D-Mich.) has talked often about reaching some kind of minimal framework before the elections that would show investors and the public that Republicans are willing to close tax loopholes and Democrats are willing to address entitlement spending. Republicans including Sens. Lindsey Graham (S.C.) and John McCain (Ariz.) say they are willing to close some loopholes and are talking about a potential deal.

SOUND THE ALARM Rep. Buck McKeon (R-Calif.), chairman of the House Armed Services Committee, has been on a year-long campaign to illustrate how searingly painful sequestration would be to the defense industry. McKeon is focused so intensely on the defense budget it can be hard for him to shift to other topics. Asked recently about the need for congressional oversight for the president's reported involvement with kill lists, secret wars in Yemen and a possible cyberwar on Iran, McKeon sidestepped these issues, bringing the conversation back to the budget.

Last week, he wrote a letter to the Office of Management and Budget formally requesting director Jeffrey Zients to testify before his committee on the impact of sequestration. On the Senate side, McCain and others are trying to pass a bill that requires the administration to spell out the impacts on the federal government.

Within industry, the Aerospace Industries Association (AIA) and the National Association of Manufacturers have promoted studies showing that sequestration could cause the loss of more than one million jobs. Steven Fuller, a professor at George Mason University, who conducted the study cited by AIA, points out that steep job losses due to sequestration and other economic factors could begin within the first weeks of the new year. By mid-July, Fuller plans to issue a follow-up study examining the impact of the budget cuts to other federal agencies, which he says could double the effect of job losses and drive the economy into recession.

Impacts are already being felt in the information technology sector. And lower-tier suppliers with smaller cash reserves and services contractors reliant on operation and maintenance dollars could feel the hit first, says Todd Harrison of the Center for Strategic and Budgetary Assessments.

Still, the uncertainty created by sequestration is making it difficult for contractors to select where cutbacks will occur. Consequently, Lockheed Martin Chairman Robert Stevens warned recently that layoff notices for some or all of its employees could be sent out just because of the company's legal obligations in September and October, preceding the election. “For us, the consequences of sequestration are real, and they're nearer-term than some discussions that are underway today that suggest in the lame-duck session of Congress, after the November election, sequestration can be undertaken then,” Stevens says.