Obama, Democrats fail to agree on plan for expiring tax cuts

These leaders have important roles in the debate over whether to remake the federal tax code.
By Lori Montgomery and Shailagh Murray
Washington Post Staff Writers
Thursday, November 18, 2010; 11:10 PM

President Obama and congressional Democrats failed to agree on a strategy Thursday for extending an array of expiring tax breaks, with the party badly divided over whether to temporarily extend the cuts for all taxpayers or stick with their pledge to protect only the middle class.

During a meeting at the White House, Democrats resolved to stage a vote on the plan that they have backed for months, which formed a key plank in Obama's presidential campaign platform: Extend the tax breaks for families earning less than $250,000 a year while letting tax rates rise for wealthier taxpayers.

House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) both said they would put such a plan to a vote in their respective chambers immediately after the Thanksgiving break. But Democrats acknowledged that such a bill is unlikely to pass the Senate, where Republicans - and at least half a dozen Democrats - are arguing that it makes no sense to raise anyone's taxes when the economy is so weak.

"There's not a consensus," said Sen. Joseph I. Lieberman (I-Conn.), emerging from an afternoon meeting at which Senate Democrats wrestled with the tax issue for nearly three hours, discussing numerous options without reaching agreement.

"I think there's a reality here, which is that while it might be best to continue the middle-class tax cuts and raise taxes on higher-income people, the votes are not there to do that," Lieberman said, adding that he would support continuing all the cuts for two years to avoid an across-the-board tax hike.

Democrats also said they were reluctant to take any permanent action while a presidential commission seeks to identify fiscal reforms aimed at lowering deficits over the long term.

"You can't decide any one of these in a vacuum," said Sen. Barbara A. Mikulski (D-Md.). "Some of us are asking questions of, if you do this now, do you lock yourself in? . . . Many of us want to know the consequences" of agreeing to permanent cuts.

Unless Congress acts, virtually every taxpayer will be hit with higher taxes in January that could leave monthly paychecks hundreds of dollars lighter. Republicans and Democrats alike say they are eager to avoid that outcome, which could damage the fragile economic recovery along with their political fortunes.

Since the elections earlier this month that gave Republicans control of the House and a stronger hand in the Senate, however, the two sides have yet to have much luck working together. Republicans don't fully take power until January; however, the political aftershock has already changed the dynamics on Capitol Hill. On Thursday, the House failed to approve a plan to extend emergency unemployment benefits, with all but 11 Democrats voting for it and all but 21 Republicans voting against it.

Emergency unemployment insurance, which provides up to 99 weeks of income support, is set to expire Nov. 30. Unless it is extended, advocates say as many as 3 million people will see their checks cut off by the end of January. Senate Democrats and Republicans did find common ground on one issue, voting late Thursday to put off a pay cut for doctors who treat Medicare patients.

A partisan battle may also be brewing over government spending. The government will shut down Dec. 3 unless Congress acts. But Senate Minority Leader Mitch McConnell (R-Ky.) said he would oppose a move by some Democrats to push through a full year's worth of higher spending, rather than adopting a temporary measure to keep funding government at last year's levels.

"If this election showed us anything, it's that Americans don't want Congress passing massive trillion-dollar bills that have been thrown together behind closed doors. They want us to do business differently," he said.

On taxes, McConnell has his own multitrillion-dollar bill that would make all the expiring tax cuts a permanent part of the tax code - and increase deficits by nearly $4 trillion over the next decade, according to congressional budget analysts. If McConnell will permit a vote on the Democratic tax bill, Reid said he would "be happy to help arrange" a vote on McConnell's bill as well. Republican aides acknowledged that McConnell's measure also is likely to fail.

"Fixing this problem should be our priority in the limited time remaining this year - not forcing votes on the liberal wish list," McConnell said in a statement.

That leaves both sides back where they started earlier this week: awaiting a bipartisan meeting of the minds at the White House, now set for Nov. 30.

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