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Obama predicts success for tax deal

Posted: December 10th, 2010 -- 10:06 AM ET

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CNN Wire Staff


Washington (CNN) -- President Barack Obama said Friday he's confident that Congress will pass a compromise tax package despite the objections of House Democrats.

"Nobody -- Democrat or Republican -- wants to see people's paychecks smaller on Jan. 1 because Congress didn't act," Obama said in an interview with National Public Radio.

"And I think that the framework that we've put forward, which says not only that people's taxes don't go up on Jan. 1, but also that we extend unemployment insurance for a year, that we make sure that key provisions like the college tax credit, the child tax credit, the earned-income tax credit are included -- that that framework is going to serve as the basis for compromise."

The debate over taxes in the waning days of a lame-duck session of Congress illustrated the mistrust and animosity that has built up in the deeply partisan environment on Capitol Hill.

Democrats voted Thursday against considering the tax package that Obama negotiated with Republicans, raising questions over the president's influence in his own party.

Rep. Gary Ackerman, D-New York, told CNN Friday that the tax plan will need Republican support to pass so that voters in 2012 will know it was not Democrats who pushed through the additional $800 billion or more in spending under the package.

Obama will have to "get more Republicans than Democrats to make it go through," Ackerman said.

So far, Republicans "haven't said that they're all going to vote for it. They haven't said how many votes they're going to provide," Ackerman noted. "This is on our (Democrats') watch. Then they're going to attack us in the next election for increasing the deficit when most of them are going to vote against it. ... Why should the Democrats get all the blame? The Republicans are very good at this. ... They get the credit for everything we do. We get the blame for everything they did that went bad."

The Senate will consider the tax package first. On Thursday, Senate Majority Leader Harry Reid, D-Nevada, released the first version of legislation to implement the negotiated deal and said the first vote on it, a procedural one to open debate, would occur Monday.

The Senate version made public by Reid was largely the same as the deal announced by Obama, but it added extensions of some tax breaks intended to spur green energy investment. The 11 energy provisions in the measure included extending existing tax credits for improving energy efficiency in homes, as well as biodiesel and diesel production. One provision extends tariffs imposed on imported ethanol along with tax credits for ethanol production.

The negotiated package includes a two-year extension of Bush-era tax cuts set to expire at the end of the year, as well as 13 months of unemployment benefits and a cut of 2 percentage points in the payroll tax. In addition, the plan extends current tax breaks for students and lower-income Americans, and adjusts the estate tax in a way that Democrats believe benefits the wealthy.

To Obama, the bottom line is that legislators from both parties will prevent a tax increase on January 1 by accepting the main components of the negotiated package, including the extension of unemployment benefits.

"At the end of the day, people are going to conclude we don't want 2 million people suddenly without unemployment insurance and not able to pay their rent, not able to pay their mortgage, not able to pay their house note," Obama said, adding that the package also will bolster the so-far sluggish recovery from a recession that has unemployment still near 10 percent.

"I think that people are also going to understand that the single most important thing we can do for all of our constituencies is to make sure that the recovery that is taking place right now gets stronger," he said, adding that economists have noted the negotiated package would increase growth and could mean more jobs, a development that "has got to be the highest priority for everybody."

He called for legislators "to act responsibly and to think not in terms of abstract political fights here ... on Capitol Hill, but to think about those families that, in the middle of the holiday season, are trying to figure out -- are they still going to have unemployment benefits at the end of this month?"

"I'm confident that we're going to be able to get this resolved by the end of the month," Obama said.

While most of the criticism of the plan has come from liberal Democrats, some Republicans also dislike parts of it.

U.S. Rep. Michele Bachmann, R-Minnesota, told CNN on Friday that the cost of the package would add to the deficit, adding that "investors are reacting to the increases in the deficit and so we're concerned about that. We want to get on a sound financial footing."

Thursday's vote by the House Democratic caucus was a defiant rejection of both the agreement on tax and benefit measures, as well as what many Democrats in the chamber perceived as being marginalized in the talks by the White House.

"This message today is very simple. That in the form that it was negotiated, it is not acceptable to the House Democratic caucus," said Democratic Rep. Chris Van Hollen of Maryland, who represented House Democrats in the negotiations. He pledged to "work with the White House and our Republican colleagues to try and make sure we do something right for the economy and right for jobs."

During their meeting, caucus members chanted "Just say no," according to two Democrats in attendance, and Rep. Laura Richardson of California later asked reporters outside the room: "Did you hear us saying 'Just say no'?"

Overall, Republicans generally appear supportive of the package, which White House advisers noted gave them their two main priorities -- an extension of the lower tax rates from the Bush era to everyone, including the wealthiest Americans, and setting a lower-than-expected estate tax rate only on inheritances of more than $5 million.

Both provisions angered liberal Democrats, who oppose extending the lower tax rates enacted in 2001 and 2003 to the wealthy. Some said Obama should have forced a showdown with Republicans over the tax cut extensions by holding out longer to force more GOP concessions.

However, Obama and White House aides said the deal reached in negotiations was the best they would get from unyielding Republicans, who will take control of the House and enjoy a stronger minority stake in the Senate when the next session of Congress begins in early January.

White House Press Secretary Robert Gibbs told reporters Thursday that he expected Congress to pass a package this year because the alternative was higher taxes for everyone after December 31.

"At the end of the day, members are not going to want to be in their districts, senators are not going to want to be in their districts, when their constituents find out their taxes have gone up by several thousands of dollars," Gibbs said, noting that the deal is a compromise with elements unpalatable to both sides. "If everybody took out what they didn't like, we'd have nothing. And we know the consequences of doing nothing."

A top Democratic adviser to the White House added that Senate Democrats "have several vehicles they can use" as the legislative base for the tax plan, and are working on a plan to pass a tax bill and "then jam the House" with that legislation.

Rep. James Clyburn of South Carolina, the No. 3 Democrat in the House, said Thursday that the estate tax provision remained a problem for his caucus.

The estate tax, which expired this year, is scheduled to be reinstated at a higher rate of 55 percent next year, with an exemption up to $1 million. A bill that passed in the House a year ago set the threshold for the exemption at $3.5 million and the tax rate at 45 percent, while the provision in the tax deal exempts estates up to $5 million and sets a lower rate at 35 percent.

However, Rep. Shelley Berkley of Nevada said she would support the tax package as a compromise made under tough circumstances.

"If it passes the Senate and this is the compromise the president of the United States has committed to, what are we going do in the House, hold this up?" Berkley said.

CNN's Dana Bash, Deirdre Walsh, Ed Henry, Tom Cohen and John Helton contributed to this report.