Dec. 6 (Bloomberg) -- President Barack Obama said he is willing to give ground to Republicans on extending Bush-era tax cuts, as White House and congressional negotiators worked on a deal that also would include extending federal jobless aid and Obama’s own soon-to-expire tax policies.
“We’ve got to find consensus here” because letting taxes rise for middle-income Americans would be a “drag” on the economy, Obama said today in a speech at Forsyth Technical Community College in Winston-Salem, North Carolina. “We’ve got to make sure that we’re coming up with a solution even if it’s not 100 percent what I want or what the Republicans want.”
Administration officials and Republican leaders have said the two sides may be able to reach an accord on taxes within days. Obama has told Democratic leaders in Congress he would reject even a temporary extension of the Bush-era tax cuts if the legislation doesn’t encompass his own policies, which include the “Making Work Pay” tax credit that adds up to $800 per year in a married couple’s paycheck, an administration official said.
“We should keep in place tax cuts for workers and small businesses that are set to expire,” Obama said in North Carolina. Extending aid to the unemployed is “not only the right thing to do, it’s the smart thing to do. Because if millions of Americans who aren’t getting unemployment benefits stop spending money that slows down businesses, that slows down hiring, it slows down our recovery.”
Negotiators are racing the calendar; the jobless aid ended Nov. 30 and the Bush tax-cuts expire Dec. 31. Obama’s demands would add about $150 billion in cost to the bill, all of which would widen deficits. Allowing his own tax cuts to expire, Obama told lawmakers, would result in a tax increase on 95 percent of Americans, according to the official, who spoke on condition of anonymity.
Obama met with Treasury Secretary Timothy Geithner and budget director Jack Lew, his chief negotiators on the tax package, this morning before leaving for North Carolina, the official said.
Obama made his demands after Congress failed to advance legislation that would renew the Bush-era policies only for American individuals who earn less than $200,000 and couples who make under $250,000, thresholds Obama set as a campaign promise. The Senate on Dec. 4 rejected legislation with that cap as well as another measure with a $1 million threshold.
Optimism on Deal
Senate Republican leader Mitch McConnell of Kentucky said it’s “pretty clear” Bush-era tax cuts will be extended and that he is “optimistic” that Congress will strike a deal to extend existing tax breaks before the end of the year.
“We’ve had more conversations in the last two weeks than the last two years,” he said on NBC’s “Meet the Press” program. “I think we’re going to get there.”
McConnell said he expects Congress to extend existing tax rates on income, capital gains and dividends for all Americans, including a temporary extension for high-income taxpayers. He also said he expects that unemployment benefits will be extended.
Obama is “confident” of reaching a deal with Congress to extend tax cuts and unemployment benefits within the next few days, Bill Burton, deputy White House press secretary, told reporters on Air Force One.
Republicans have pushed for a permanent extension of tax breaks for all taxpayers, saying selective extensions would hurt the economy.
“We don’t want no tax increases on nobody,” Representative Jeb Hensarling, a Texas Republican, said on the “Fox News Sunday” program. “That may be poor grammar, but it’s great economics.”
Democrats would prefer to let the tax rates expire for upper income taxpayers, while making the breaks permanent for middle and lower-income families. Obama argues that extending the cuts for the top rates permanently would be too costly. He said today that “reducing our long-term deficit has to be a priority.”
Still, both sides appear willing to compromise to avoid a tax increase when the cuts expire at the end of the year.
Republican Senator Orrin Hatch of Utah said he would be willing to support a temporary two- or three-year extension of tax breaks for upper income taxpayers.
No Permanent Cuts
“We would like it permanent, but we can’t, we don’t have the votes,” he said on CNN’s “State of the Union.”
Asked on CBS’s “Face the Nation” program, if Democrats would support extending tax cuts for the wealthy, Illinois Senator Dick Durbin, the second-ranking Democrat in the chamber, said negotiations are “moving in that direction.”
Even as lawmakers talked of a deal, Majority Leader Harry Reid of Nevada scheduled matters other than tax cuts for Senate floor time this week. That led McConnell to say Reid was clogging the year-end agenda with less pressing legislation.
The floor agenda includes procedural votes on an immigration bill, impeaching a federal judge, and compensation for workers injured while cleaning up the World Trade Center after the Sept. 11, 2001, terrorist attacks.
“I think it’s time for the games to stop,” McConnell said.
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