The New York Times
By: David M. Herszenhorn & Jackie Calmes
December 2, 2010
WASHINGTON -- The Obama administration is holding out for an extension of unemployment assistance and of a variety of expiring tax breaks for low-wage and middle-income workers as part of a deal with Congressional Republicans to extend all the Bush-era tax cuts.
But it is unclear how much leverage the White House has in the tax negotiations, given the drubbing Democrats took in the midterm elections, the tight Congressional calendar and a threat by Senate Republicans to block any legislation until the tax fight is resolved.
In a symbolic nod to President Obama's pledge to let the tax cuts on upper-income brackets expire on Dec. 31, as scheduled by law, the House on Thursday approved a bill to continue the lower tax rates enacted during the Bush administration for Americans they described as "middle class." The vote was 234 to 188, with three Republicans joining 231 Democrats in favor; 20 Democrats and 168 Republicans were opposed.
The bill, however, has no chance of passage in the Senate, where even some Democrats say the tax cuts should be extended for everyone, at least temporarily, given the continued weakness in the economy.
Senate Democratic leaders scheduled their own symbolic votes for Saturday, intending to demonstrate their desire to end the tax cuts for the rich.
Republicans, meanwhile, expressed dismay at the posturing by Democrats, which they said was delaying the inevitable and even getting in the way of a potential deal on aid for millions of unemployed Americans whose benefits have started to run out.
Administration officials said no deal was at hand, and negotiators from the administration and the two parties in Congress met only briefly on Thursday. It is possible that the parties will be unable to reach a compromise, in which case tax rates will revert at the end of this year to their pre-2001 levels, meaning an across the board tax increase. However, the Treasury could be directed to keep the current rates while negotiations continue.
But the sense within both parties was that Democrats were essentially negotiating the terms of their major retreat on an issue that they once considered a slam-dunk on both substantive and political levels.
Senior Senate Republican aides said that an extension of all the income tax cuts was a foregone conclusion, but that a deal on jobless aid was possible if Democrats agreed to cover the cost. Democrats expressed indignation that Republicans were insisting on finding spending cuts to offset the unemployment benefits while being perfectly willing to add to the national debt the $700 billion cost of continuing the tax cuts on the highest incomes for the next decade.
"This is so grossly unfair," the House speaker, Nancy Pelosi, said in a floor speech urging passage of the so-called middle-class tax package.
While the House bill has no chance of becoming law, it holds enormous symbolism for Democrats, who used the debate to accuse Republicans of standing for the rich. In an indication of the tensions between the parties on the issue, the House Republican leader and soon-to-be speaker, John A. Boehner of Ohio, derided the Democratic maneuver to force a vote on the bill as "chicken crap."
Even as lawmakers were debating the bill on the House floor, negotiators, including the Treasury secretary, Timothy F. Geithner, were meeting in talks that all sides expected to end in a temporary extension of the tax rates for all income levels, perhaps for two or three years.
At the White House, administration officials outlined a list of their demands for an extension of expiring tax breaks, including the $800-per-couple "Making Work Pay" tax credit for about 110 million households, a tuition tax credit for 8 million college students, and the earned-income tax credit and child tax credit for 15 million low-income families. They also listed expiring tax breaks for small businesses. They said those tax credits would have a greater impact on the economy than continuing the Bush tax cuts on upper income levels.
And with federal unemployment aid having expired on Tuesday for two million Americans, Mr. Obama is seeking a one-year extension. Senate Republicans on Wednesday blocked an effort by Democrats to take up a bill extending the benefits.
More Americans have been out of work beyond the 26-week period typically covered by state unemployment assistance than at any time in the decades since the government began keeping records. The unemployment assistance at issue is federal emergency aid for people who are unemployed beyond six months.
About 6.2 million Americans have been out of work for 27 weeks or more, according to the federal Bureau of Labor Statistics.
Mr. Obama's Council on Economic Advisers reported on Thursday that nearly seven million Americans could lose benefits through next November as more people remained out of work for long periods.
Talks at the Capitol involving senior lawmakers from both parties, Mr. Geithner and the White House budget director, Jacob Lew, are expected to continue into next week.
But in the meantime, the majority leader, Harry Reid of Nevada, said he would bring the House bill to the Senate floor on Saturday and would hold votes on that measure, as well as on an alternative Democratic proposal to raise the threshold at which the lower rates expire to $1 million.
Democrats had hoped to hold those votes on Friday, as well as votes on two Republican proposals for extending the tax breaks, but late Thursday a single Republican senator registered an objection stopping those votes.
That prompted Mr. Reid to note that even after agreeing to take up the tax issue before anything else, he was encountering Republican obstruction.
"I think everybody remembers that famous letter that was written to me saying until we get tax cuts resolved, funding the government, we're not going to let you do anything legislatively," he said at a news conference late Thursday. "We're at a new one tonight. They are not going to let us do anything with tax cuts or funding the government."
The Republican alternatives include one from the Senate Republican leader, Mitch McConnell of Kentucky, that would indefinitely extend all of the Bush-era income tax cuts. None of the measures is expected to win the 60 votes needed to advance.
Congressional Democrats expressed deepening frustration with the White House, which they said had made numerous missteps that gave Republicans the upper hand. Some Democratic aides said that Vice President Joseph R. Biden Jr. had been asked to attend a caucus meeting to defend the White House negotiating stance. A spokesman said Mr. Biden had a previous commitment.
Congressional Democrats also voiced worries that the administration was ready to give in quickly to Republican demands, in a bid to preserve time on the Senate calendar for ratification of an arms control treaty with Russia known as New Start.
Separately, the Senate approved a 15-day extension of the temporary spending measure that has financed the federal government since Oct. 1 and was set to run out on Friday.