President faces anger from party

WASHINGTON - President Obama mounted a hard sell Tuesday for his proposed tax-cut compromise, moving to quell a growing rebellion among congressional Democrats while appealing directly to the American people about the economic urgency of a deal that mostly pleases Republicans.

Congressional Democrats have yet to embrace the nearly $900 billion deal, and opposition within the president's own party could force the administration to try to enact the tax-cut package with a bipartisan coalition made up mostly of Republicans.

Underscoring the unhappiness, congressional leaders had yet to schedule votes in either the House or Senate. Lawmakers met behind closed doors into the evening to assess what leverage, if any, they have.

"It's very troubling for all of us," said Rep. John Larson (D., Conn.), the No. 4 in party leadership. The deal would extend the Bush-era tax cuts across the board, including for the wealthiest earners, which angered liberals.

"I think a ransom was paid, and it was a very high price," said Sen. Frank Lautenberg (D., N.J.), among the wealthiest members of Congress. "I don't give a damn about a tax cut. I'd rather have a strong country than to get a few bucks back on my taxes."

But Mayor Nutter praised Obama for his decision-making and "bringing home a victory for all Americans."

With the full extension of unemployment benefits for 13 months, the deal benefits the city's 73,000 unemployed workers, giving them time to look for jobs while being assured of having enough money to put food on the table, Nutter said.

Obama joined in the criticism of the tax cut for wealthy earners, which would cost $68 billion a year in government revenue. But he said there was no way to prevent it while ensuring that middle-class Americans retained their tax cuts and unemployed Americans continued receiving benefits.

"I've said before that I felt that the middle-class tax cuts were being held hostage to the high-end tax cuts," Obama said at a White House news conference. "I think it's tempting not to negotiate with hostage-takers, unless the hostage gets harmed. In this case, the hostage was the American people, and I was not willing to see them get harmed."

Obama dispatched Vice President Biden to meet with lawmakers. At a closed-door lunch on Capitol Hill, Biden framed the issue as "a bad situation, and a good deal," those present said.

Sen. Barbara A. Mikulski (D., Md.) said it was a "rowdy" and "raucous" gathering. "He was warmly received, and challenged," said Sen. Ben Nelson (D., Neb.).

Majority Leader Harry Reid of Nevada expressed unhappiness with the deal and said changes were needed. "This is only a framework," he said. "Some in my caucus still have concerns." House Speaker Nancy Pelosi, who has refused to commit her support, said only that her caucus remained divided.

Republicans have largely signed on to the plan, especially after extracting a revamped estate tax that will raise the exemption to $5 million for singles, $10 million for couples.

"I'm very hopeful and optimistic that a large majority of members of the Republican Conference will find this proposal worth supporting," said Sen. Mitch McConnell of Kentucky, the GOP leader. "And I'm hopeful that the Democratic leaders will be able to convince their members as well."

But as Democrats wrestled with the plan, Obama warned against rigid positions that lead only to gridlock. "People will have the satisfaction of having a purist position and no victories for the American people," he said, comparing criticism of the deal to liberal complaints that the landmark health-care law did not go far enough.

Members of the White House economic team told senators there would be dire consequences without the package.

Jobless aid has already run out for hundreds of thousands of Americans, and tax cuts that had been approved during the George W. Bush administration expire Dec. 31, as do others that were part of last year's economic-stimulus bill, leading to a tax hike on nearly every taxpayer without action.

Under concessions from Republicans in the deal, Americans will see a continuation of college tuition and child tax credits and a new 2 percentage-point cut in the payroll tax that will put up to $2,000 in every worker's pocket.

"What this package does is provide an additional boost that is substantially more significant than I think most economic forecasters had expected," Obama said during the news conference. "And in fact, you've already seen some, just over the last 24 hours, suggest that we may see faster growth and more job growth as a consequence of this package."

The bulk of the package is not offset by revenues or spending cuts elsewhere, presenting another obstacle to deficit-weary lawmakers battered in midterm elections by voters concerned over spending and debt.

"The president and Democrats, in both the House and the Senate, have been very clear on our position that at a time when the deficit is at unacceptable levels, giving tax cuts to high-income Americans is not appropriate," said Rep. Steny H. Hoyer (D., Md.), the House majority leader.

Democrats were particularly incensed by the new threshold for the estate tax, which would benefit just 3,500 households nationwide next year, economists said.

Economists said the overall package would stimulate the economy not by pumping in new money, as did the Recovery Act, but by ensuring that money already going to Americans via the Bush tax cuts and the earlier stimulus spending is not cut off.

White House economic experts told lawmakers that the gross domestic product could rise by at least 1 percentage point and unemployment could improve with up to two million new jobs. Without the package, senators were told, the economy could contract.

Yet, after having passed various emergency spending bills that have not won public approval, lawmakers remained skeptical.

The tax-cut deal outlined by the president would:

Extend all tax rates approved under George W. Bush for two more years for all taxpayers. Republicans wanted a permanent extension. Obama wanted to extend the rates only

to $250,000 of a household's income.

Apply a 35 percent tax for two years on estates worth over $5 million. The administration had proposed a 45 percent rate with a $3.5 million threshold.

Extend unemployment insurance for 13 months, providing benefits to two million long-term jobless workers in December and seven million over the next year.

Cut payroll taxes by

2 percentage points for 2011, for a total of $120 billion. Employees would pay 4.2 percent to Social Security instead of 6.2 percent. A worker who earns $40,000 a year would get $800 over the year; a worker who earns $70,000 would get $1,400.

Extend increases in

the Earned Income Tax Credit, the child credit, and tuition tax credits adopted in the 2009 stimulus package that were set to expire.

Preserve for two years the 15 percent tax rate on most capital gains and dividends, and adjust the alternative minimum tax to spare as many as 21 million households from it.

Allow businesses to write off 100 percent of their capital investments for tax purposes during 2011. The current writeoff is 50 percent.

- Associated Press

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