Obama, GOP in quiet talks to extend 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
Friday, December 3, 2010; 3:16 PM

The White House and congressional Republicans have begun working behind the scenes toward a broad deal that would prevent taxes from going up for virtually every U.S. family and authorize billions of dollars in fresh spending to bolster the economy.

Negotiations have accelerated in recent days as Congress has confronted deadlines for extending a series of tax cuts that expire at the end of the month, renewing emergency jobless benefits and keeping the government funded into next year.

The talks mark the dawn of a new era on Capitol Hill, with resurgent Republicans holding far more leverage and commanding a more prominent role in crafting legislation. The private discussions, which parallel a more public set of talks, have left many Democrats grousing that President Obama is being too quick to accommodate his adversaries, who are still a month away from taking control of the House and expanding their presence in the Senate.

Republicans are demanding that Democrats extend Bush-era tax cuts at all income levels at least temporarily, not just those that primarily benefit the middle class. They are also pressing Democrats to approve a measure to keep the government funded through September, a move aimed at avoiding a fight with the White House over spending that could provoke a government shutdown.

In return, Obama is seeking Republican support for as much as $150 billion in new spending on the economy, including an additional 13 months of emergency jobless benefits and another year of his signature "Making Work Pay" tax cut for working families.

The latest round of jobless benefits expired Tuesday night, leaving 2 million people facing the holidays without income support. New U.S. Bureau of Labor Statistics figures out Friday showed the unemployment rate climbed two percentage points last month to 9.8 percent, dashing hopes that the economic recovery was picking up. Failure to renew the benefits could do widespread harm to jobless families and, according to a White House economic report released Thursday, destroy 600,000 jobs over the next year as those families curb spending.

Obama made that point Thursday in remarks to a gathering of newly elected governors at Blair House. "Our hope and expectation is that unemployment insurance - something that traditionally has had bipartisan support - is something that once again will be dealt with as part of a broader package," he said.

Republicans have so far resisted, arguing that if jobless benefits are extended, the cost should be covered by cutting spending elsewhere.

The Making Work Pay tax cut, meanwhile, is one of dozens of tax measures that will expire Dec. 31 unless Congress acts. Public attention has focused on the Bush tax breaks, the largest block of provisions. But a variety of other tax breaks that benefit businesses, college students and poor working families also are set to expire or need to be renewed.

If successful, the back-channel negotiations would add hundreds of billions of dollars to future deficits, even as a bipartisan commission appointed by Obama is trying to build support for a plan to balance the budget. In a briefing for reporters, a senior administration official noted the contradiction but said the provisions being considered would "enhance growth" at a critical moment.

Also on the table: an immediate vote to raise the legal limit on government borrowing - months before an increase is needed. The move would defuse a potentially explosive debate in the spring, when a new tide of conservative lawmakers is threatening to block an increase in the debt limit, risking a government default.

The negotiations, which were conducted primarily with the office of Senate Minority Leader Mitch McConnell (R-Ky.), predate a bipartisan meeting Tuesday at the White House over the year-end legislative agenda, according to congressional sources. Handled by phone and through other back channels, the talks are running parallel to more public bargaining sessions led by Treasury Secretary Timothy F. Geithner and White House budget chief Jacob Lew.

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