His tax cut compromise under Democratic attack, President Barack Obama set a news conference on short notice on Tuesday to sell the plan worked out in secret talks with Republicans over several days.
Several officials said the cost of the package could add $900 billion or more to the deficit over two years by extending tax cuts from the Bush era that are due to expire at year’s end, renewing jobless benefits through the end of 2011 and granting a one-year cut in Social Security taxes.
Speaker Nancy Pelosi, normally one of Obama’s staunchest allies, made plain her unhappiness with a statement that contained no commitment to help pass the plan. “We will continue discussions with the president and our caucus in the days ahead,” said the statement, issued 18 hours after the president made his announcement.
The administration mounted a full-scale defense of the agreement, saying it 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.
Sen. Joseph 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 in public and private, Democrats expressed anger that Obama had bowed to Republican demands to extend the expiring tax cuts on the upper income and make additional concessions to the GOP on estate tax relief.
Vice President Joseph Biden spent part of his day in the Capitol, meeting first with Senate Majority Leader Harry Reid and then the party’s rank and file. House Democrats arranged a similar closed-door meeting for late in the day, but it was not known if Biden would attend.
Republican officials said the vice president had played a key role in negotiations on the deal, and had spoken often in recent days with GOP Senate Leader Mitch McConnell of Kentucky.
Biden also fielded complaints from Pelosi and other Democrats in a meeting Saturday night, and again on Monday at the White House before the president announced publicly he had agreed on a framework agreement with the GOP.
The liberal group MoveOn, which claims 5 million members, came out against the plan, saying the wealthiest Americans don’t need tax cuts that were scheduled to expire this month. “The president’s commitment to bipartisanship should not mean leaving principles behind,” MoveOn said.
But Biden urged congressional Democrats to quickly embrace the plan, saying Congress needs to move on to other issues before the Democrats lose control of the House in January. The president has made ratification of a new arms control treaty with Russia a top year-end priority.
Both houses must approve any tax bill.
In her statement, Pelosi said the compromise plan shows that Democrats want to help low- and middle-income workers while the GOP’s chief concern is the wealthiest Americans.
But others noted that Obama had abandoned a long-held position in fashioning the compromise.
Obama promised in his 2008 campaign — and many times since — that these breaks would be continued only for the middle-class. But some in his own party and liberal groups attacked the new tax plan, and even the Democratic leadership in Congress gave it a cool, noncommittal reception.
Besides holding current tax rates in place for all, the proposal would extend unemployment benefits and reduce payroll taxes for a year, which would help many lower-income Americans.
Obama has said that he still prefers to let the tax cuts expire for households earning more than $250,000 a year.
Obama, while acknowledging Democratic unrest, agreed to extend all the tax breaks for two years, noting that Republicans wanted a permanent extension.
The emerging agreement includes tax breaks for businesses that the president said would contribute to the economy’s recovery from the worst recession in eight decades.
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 and Alan Fram contributed to this report.
Source: The Associated Press.