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Tax fight puts Schumer at odds with Obama

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Dec. 9 (Bloomberg) -- White House economic adviser Lawrence Summers discusses the compromise deal on taxes between President Barack Obama and congressional Republicans. Summers, speaking with Julianna Goldman on Bloomberg Television's "In the Loop," said the accord will help remove doubt about the U.S. economic recovery, which faces more challenges because of Europe's financial turmoil. He also said the tax package will help reduce the budget deficit "in the medium term." (Source: Bloomberg)

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By Shailagh Murray
Washington Post Staff Writer
Friday, December 10, 2010; 12:00 AM

President Obama is getting along better than ever with Capitol Hill Republicans. But his relationship with Democratic Sen. Charles E. Schumer has hit a rough patch.

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The newly appointed Senate Democratic "message" guru has emerged as the White House's chief antagonist over the tax cut deal Obama worked out with GOP leaders.

To Schumer (N.Y.), Obama's decision to accept a two-year extension of all the tax cuts enacted by President George W. Bush - even at the highest income levels - is a needless capitulation to resurgent Republicans. Schumer wanted the president to push harder to extend the tax cuts, set to expire at year's end, only for middle-class families.

But to the White House, it is Schumer who is acting recklessly by seeking to wage class warfare with just days left on the legislative calendar, risking the health of the economy and the pocketbook of every middle-class household with his threat to carry the fight into next year.

The contentious, mostly private standoff has turned Schumer into an unlikely villain among administration officials who have long valued his tactical skills and political acumen. It has also made him an unlikely champion to liberal activists who are seething at the Obama deal. In an appeal this week to supporters, the liberal group Moveon.org praised Schumer, a long-time ally of Wall Street, as one of their "progressive heroes" and saying "we need you now."

Obama views the fate of the Bush breaks as chiefly an economic question, and to him, the answer is clear: The sputtering recovery can't withstand any tax increases. The White House also hopes cutting a deal with Republicans will help to clear away some GOP opposition to additional stimulus spending the president wants to enact and to the ratification of the New START nuclear arms treaty with Russia.

Schumer took a different view. Middle-class independent voters abandoned Democrats in droves last month, and Schumer, who just won a third term, wanted to portray the GOP as the party of millionaires and billionaires.

"Our colleagues on the other side of the aisle said, 'Did you hear the mandate of the election?' " Schumer told reporters last week. "Well, I ran this year, I got 66 percent of the vote in my state. And I saw lots of people and lots of angry people. . . . But not a single one of them, from the tea party or anywhere else, said give tax breaks to the millionaires."

For the White House, vindication arrived Saturday, when Democrats failed to pass two measures that would have allowed the Bush tax breaks to expire on top earnings. One provision, Obama's original preference, would have preserved all the Bush tax cuts on household income below $250,000 per year. A second measure, offered by Schumer, sought to preserve cuts on household income below $1 million per year.

"His advice was to fight until February and then cut a deal, so we could score some points against the Republicans," said a senior administration official, speaking on background. "It just didn't make sense."

Schumer declined to address the feud. "No comment," he said Thursday.

Many Democrats dislike the Obama-GOP deal, which in addition to extending all the Bush tax cuts would provide a generous exemption to the wealthy on the estate tax. The legislation, now pending on the Senate floor, also includes a one-year payroll tax holiday, generous business-investment incentives and continued jobless benefits for the long-term unemployed.


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