Pres. Obama defends tax deal with Republicans

WASHINGTON - December 7, 2010

"I'm not here to play games with the American people or the health of the economy," Obama said of his day-old deal, which is designed to avert a scheduled Jan. 1 expiration of tax cuts at all income levels.

In a remarkable political role reversal, Republicans lined up to support the package, while lawmakers of the president's party said they were prepared to oppose it. Liberal Sen. Bernie Sanders, I-Vt., pledged to "do everything I can to defeat this," including a filibuster to prevent a final vote.

The deal includes an extension of expiring Bush-era tax cuts for all income levels - not just for lower and middle-income taxpayers, as Democrats wanted. It also contains a renewal of jobless benefits due to expire in a few weeks, and a one-year cut in Social Security taxes paid by workers.

Other elements would loosen the estate tax and provide breaks for businesses to spur hiring. Officials said that overall, the proposal could add $900 billion to the federal deficit over two years.

Democratic opposition focused chiefly on two parts of the deal that marked concessions to Republicans - the decision to let expiring tax cuts remain in effect for people in upper incomes, and a change in the estate tax that the GOP has long sought.

Pelosi called the estate tax provision "a bridge too far," and Reid also singled it out for criticism. It would allow $5 million per spouse to pass tax-free to heirs, and tax anything above that level at 35 percent.

The compromise is "something that's not done yet," said Senate Majority Leader Harry Reid, D-Nev. "We're going to have to do some more work," he said after a closed door meeting with Vice President Joe Biden and members of the Democratic rank-and-file.

Across the Capitol, Speaker Nancy Pelosi issued a statement that said, "We will continue discussions with the president and our caucus in the days ahead."

At his hastily called news conference, Obama bristled at times, casting himself in the role of compromiser-in-chief with the best interests of the economy and public in mind.

"This isn't an abstract debate. This is real money, It will make a real difference in the lives of people who sent us here," Obama said.

The presidential news conference was part of a full-scale defense of the agreement, which the White House said would pump billions into the economy at a time it is recovering from the worst recession in eight decades and unemployment stands at 9.8 percent.

The president was critical of Democrats and Republicans, saying that if purely partisan attitudes rule, compromise would be impossible.

At one point, he appeared to liken Republican lawmakers insisting on tax cuts for the wealthy to terrorists.

"I think it's tempting not to negotiate with hostage takers, unless the hostage gets harmed. In this case the hostage is the American people and I was not willing to see them get harmed," he said.

But he also rejected criticism from Democrats. "I know there are some who would have preferred a protracted political fight," he said. But he added he had decided that compromise was preferable to letting taxes rise on Jan. 1.

The events left Democratic leaders struggling to avoid a major fight with the president, at a moment that they are hoping to complete work on several measures before Republicans take control of the House in January. Most prominently, Obama wants the Senate to ratify a new arms control treaty with Russia.

Sen. Joe Lieberman of Connecticut, a Democrat-turned-independent, urged support for the plan. "This tentative agreement is an example of Washington working across party lines to confront the challenges facing our nation," he said.

But organized labor, the liberal group and others criticized the deal.

In public and private, Democrats expressed anger that Obama had bowed to Republican demands to extend the expiring tax cuts on the wealthy and make additional concessions to the GOP on estate tax relief.

Some Democrats who met with Biden quoted him as saying the deal was the best the White House could obtain from Republicans, who had staunchly blocked legislation over the weekend to extend tax cuts only on incomes below $200,000 for individuals and $250,000 for couples.

Sen. Tom Harkin, D-Iowa, said he intended to oppose the new proposal barring changes. "It didn't wind up in a good end. The deal as struck is not the best deal for our country," he said.

Others questioned whether the deal would spur the economic growth enough to outweigh the additional damage it would do to the already disastrous debt situation.

"If we don't vote for this, what happens - not politically, but economically? If we do vote for it, how sure can we be that it will, in effect, spawn jobs pump the economy?" said Sen. Dianne Feinstein, D-Calif.

Besides holding current tax rates in place for all, the proposal would extend unemployment benefits and reduce payroll taxes for a year, avoiding a threatened cutoff in checks to two million over the holidays and as many as another five million next year.

The proposed Social Security tax cut would apply to virtually every working American. For one year they would pay 4.2 percent of their income, instead of 6.2 percent, to the government retirement program, fattening U.S. paychecks by $120 billion in 2011.

Someone earning $40,000 a year would receive a $800 benefit, and a $70,000 earner would save $1,400, officials said. More than three-fourths of all Americans pay more in these so-called payroll taxes than in federal income taxes.

The White House said money from other sources would be shifted so the Social Security trust fund loses no revenue.

Obama said he reluctantly made another concession to Republicans, concerning the estate tax. It would tax estates worth more than $5 million at a rate of 35 percent, a GOP goal. Democrats favored a $3.5 million threshold, with a 45 percent tax on anything higher.

Obama's willingness to compromise with Republicans comes a month after the GOP won resounding victories in congressional, gubernatorial and state legislative elections.


Associated Press writers Julie Pace, Alan Fram, Julie Hirschfeld Davis and Laurie Kellman contributed to this report.

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