Monday, December 6, 2010

Two Years of Failed Economic Policies Force Lame Ducks to Negotiate with Fiscal Conservatives ..

WASHINGTON (Dow Jones)--President Barack Obama's proposed deal with Republican leaders in Congress to extend tax cuts for two years is already catching plenty of criticism within his party, as Democrats prepare to debate the plan Tuesday.

House Majority Leader Steny Hoyer (D., Md.) criticized the extension of tax cuts for top earners, while House Speaker Nancy Pelosi (D, Calif.) said the estate tax proposal Obama backed adds "insult to injury."

Aware of this pushback, Obama held a televised press conference to defend the agreement as "good for country." Obama said he remained opposed to tax cuts for wealthy individuals, but said it was unlikely to convince Republicans to extend the tax breaks just for the middle class.

"In this case, the hostage was American people and I was not willing to see them get harmed," Obama said.

Obama's allies in the Capitol gave the agreement a harsh review. Pelosi said the estate tax plan "would help only 39,000 of America's richest families, while adding about $25 billion more to the deficit." The plan would exempt all estate wealth under $5 million and tax estates above that amount at 35%, for the next two years.

At the same time, Pelosi said extending tax cuts for the middle class will create jobs. "We will continue discussions with the president and our caucus in the days ahead," Pelosi said.

Importantly, House leaders didn't outright reject the parameters of the agreement, saying they need to put the plan before all of their members. House Democrats will meet in full caucus Tuesday evening.

Vice President Joe Biden met with Senate Democrats Tuesday afternoon to try to quell unrest over the plan. Besides concerns about the deficit, Democrats are frustrated that the framework would extend tax cuts for top earners, and that it includes an estate-tax provision that the majority of Democrats believes is too generous.

Rep. Bill Pascrell (D., N.J.) said in an interview he is unsure if a majority of House Democrats will back the plan, as some feel the president is "almost treating us as irrelevant."

"They got him to blink first," Pascrell said of Republicans, "and many of us are very dubious about that."

Sen. Mary Landrieu (D., La.), a centrist Democrat, said she is undecided on the bill, citing strong objections to extending the tax cuts for Americans with annual incomes above $1 million.

"We're going to borrow $46 billion from the poor, from the middle class, from businesses of all give a tax cut to families in America today that, despite the recession, are making over a million dollars" Landrieu said. "This is unprecedented"

She expressed disappointment that Obama "didn't think any of us cared about it," Landrieu said. "I want him to know, I do care."

Sen. Mark Warner (D., Va.), a leader of centrist Democrats in the Senate, criticized the tax-cut extension deal struck by the White House and Republicans because it would worsen the deficit.

"This basically takes a traditional Washington approach of, 'Let's add to the deficit and kick the can down the road,'" Warner said Tuesday morning on MSNBC.

Warner said he will wait until he reviews the details to announce how he will vote on the package, but said he is disappointed the deal will add billions of dollars to the deficit without addressing the budget gap over the long term.

Financial markets welcomed word of the broad tax agreement, with the Dow Jones Industrial Average recently up 42 points at 11404. Analysts at Wells Fargo Securities said the agreement "should help to reduce uncertainty within the financial markets."

"The result of this deal, once passed, will support greater income and spending on the part of consumers and provide investors with a much clearer picture of short-term fiscal policy," Wells Fargo analysts said in a note to investors.

The deal doesn't include an extension of Build America Bonds, federally subsidized bonds for state and local infrastructure projects that Obama has championed.

More than $150 billion of the bonds have been issued to help finance projects including upgrades to Alaskan airports and to school, water, sewer and electric facilities across the country.

Senior administration officials have implied that the White House-GOP deal didn't address Build America Bonds and other issues such as expiring energy tax credits, and that such provisions could be added in before the legislation comes to the House or Senate floor.

But Republican opposition to the bond program makes that prospect extremely uncertain.

Obama and congressional Republicans Monday announced a compromise deal to extend the Bush tax cuts across the board until 2013, including a 15% tax rate on capital gains and dividends.

Sen. Olympia Snowe (R., Maine.), said she will vote for the agreement when it reaches the Senate floor. She praised the extension of tax cuts and expiring unemployment benefits, calling the deal a "display of bipartisan cooperation at a time when this country desperately requires it."

Under the deal, estate taxes would be set at 35%, exempting all estate wealth under $5 million. Businesses would get a retroactive, two-year extension of tax cuts that lapsed at the beginning of 2010, including a tax credit for research and development.

The deal also would lower worker payroll taxes by two percentage points in 2011, adding $120 billion to the deficit. It would extend unemployment benefits through the end of 2011.

Businesses would be allowed to write off 100% of new equipment purchases in 2011, another proposal pushed by the White House. In 2012, that "bonus depreciation" would be reduced to 50% of the cost of new equipment.

-By Martin Vaughan and Corey Boles, Dow Jones Newswires; 202-862-9244;

-Alan Zibel contributed to this article.

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
December 07, 2010 14:51 ET (19:51 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.- - 02 51 PM EST 12-07-10


The meeting is set to occur at 3:30pm EST among the president, Senate Majority Leader Harry Reid (D., Nev.), Assistant Majority Leader Richard Durbin (D., Ill.), House Speaker Nancy Pelosi (D., Calif.) and House Majority Leader Steny Hoyer (D., Md.).
One congressional aide said the president is expected to provide an update to the Democratic leaders rather than present details of a final deal administration officials have worked out with Republicans.
The broad parameters of a deal on how to extend the tax cuts appear to be taking shape. It is likely to include a one- or two-year extension of the Bush tax cuts that expire at the end of the year, a year-long renewal of federal jobless benefits and possible renewal of a raft of other tax measures aimed at the middle class.
-By Corey Boles, Dow Jones Newswires; 202-862-6601;
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
December 06, 2010 13:55 ET (18:55 GMT)

Copyright (c) 2010 Dow Jones & Company, Inc.- - 01 55 PM EST 12-06-10

No comments: