Obama pressing to bar tax raises for nearly all

Will need support of GOP to get bill passed in Congress

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WASHINGTON -- President Barack Obama, conceding that a "grand bargain" for deficit reduction with House Speaker John Boehner is unlikely, called Friday for Congress to approve a stripped-down measure by year's end to prevent a tax increase for all but the richest taxpayers and to extend aid for 2 million unemployed Americans.

"That's an achievable goal; that can get done in 10 days," Mr. Obama said to reporters during a hastily scheduled evening appearance in the White House briefing room. "Call me a hopeless optimist, but I actually think we can get this done."

The president, who took no questions, read his statement just after a brief phone conversation with Mr. Boehner and a separate meeting at the White House with Senate Majority Leader Harry Reid, D-Nev. It was Mr. Boehner's stinging defeat Thursday night -- when rebellious anti-tax House Republicans blocked a vote on his tax plan, after he had suspended negotiations with Mr. Obama -- that forced the president to reach for a fallback strategy with Senate help.

By Friday, both the House and Senate had closed for the Christmas break, and soon after his statement, Mr. Obama left with his family for their annual holiday trip to Hawaii, his native state. His return date is dependent on events, aides said.

But as he and Democrats in Congress envision the coming days, the Senate would reconvene Thursday to pass a compromise bill with commitments of cooperation from both Mr. Boehner and Senate Minority Leader Mitch McConnell, R-Ky., to keep the process moving.

Facing the Dec. 31 deadline for expiration of all George W. Bush-era tax cuts, Mr. McConnell would need to promise not to filibuster, and Mr. Boehner would have to agree to a House vote on the Senate-passed bill.

Presumably, the sort of fallback measure that Mr. Obama seeks could pass in the House only with strong support from Democrats, since conservative Republicans -- by their revolt against Mr. Boehner this week -- have signaled that they would not approve even legislation that raises tax rates for fewer than 1 percent of Americans.

While many in both parties believe that Mr. Boehner will permit the vote on a compromise under the intense pressure, with public opinion on the newly re-elected president's side, doing so could threaten his already-weakened speakership among conservatives.

Without such action, taxes would increase Jan. 1 for every taxpayer. National polls have shown that most Americans would blame Republicans.

Mr. Obama, backed by congressional Democrats, is proposing as he has for four years that the Bush tax rates be extended permanently for all income less than $250,000 a year. In negotiations with Mr. Boehner, he had tentatively agreed to raise that threshold to $400,000, and congressional Democrats on Friday said they would go as high as $500,000 if it would seal a deal with Republicans.

But the Republicans' rejection of Mr. Boehner's bill Thursday indicated that such a concession by Democrats would not sway the anti-tax absolutists among them. The speaker's so-called Plan B would have extended the Bush tax cuts for income up to $1 million, meaning a tax increase for only an estimated 0.3 percent of households -- yet that was too much for many GOP members.

While the strategy that Mr. Obama and Mr. Reid are now pursuing requires the acquiescence of both Republican leaders, Mr. McConnell has given no indication whether he would give it. Asked at the Capitol before Mr. Obama's statement whether he would agree not to filibuster the stripped-down bill, he stepped onto an elevator and said "Merry Christmas."

Mr. Boehner has not said when or whether he would call the House back in session, but a spokesman said late Friday that the speaker would return to Washington from his Ohio home after the holiday, "ready to find a solution that can pass both houses of Congress." Boehner spokesman Brendan Buck said, "It is time for the Democratic-run Senate to act, and that is what the speaker told the president tonight."

As Capitol Hill Democrats described the possible fallback plan, it would be similar to legislation the Senate already passed to extend the Bush tax rates for income less than $250,000, increase to 20 percent from 15 percent the tax rate for capital gains and dividends income, and extend some other tax breaks.

But the new bill, they said, would also delay the so-called sequester in January -- across-the-board spending cuts in military and domestic programs that Mr. Obama and Congress scheduled in mid-2011 as an incentive for the two sides to approve an alternative, more deliberate deficit-reduction compromise. And it would extend federal unemployment benefits for the estimated 2 million Americans who have been out of a job for long enough to exhaust their initial state aid.

A Reid spokesman said in a statement: "As a fallback plan to protect the middle class, Republicans should support passing a bill that extends tax cuts for families up to $250,000, extends unemployment insurance and delays the so-called sequester, while we negotiate additional policies next year. But the bottom line is that moving forward on any solution will require cooperation from Speaker Boehner and Sen. McConnell."

While Mr. Obama said the bill also should provide "the groundwork" for Congress to achieve additional deficit reduction next year through overhauls of the tax code and spending for fast-growing entitlement programs, chiefly Medicare, congressional Democrats said the likely measure by itself would do nothing to put such efforts in motion.

The upshot is that, for a second year, Mr. Obama has been unable to reach agreement with Mr. Boehner on a debt-reduction framework that would stabilize the nation's debt, which is growing unsustainably as the population ages and medical costs rise.

Nor, Democrats said, would the measure extend the nation's borrowing limit, which the Treasury will hit early in 2013. Mr. Obama had hoped for a deal that would include a debt-limit increase, to avert the short of showdown that damaged the economy -- and both parties' public approval ratings -- last year.

By his resort to the stripped-down legislative option, Mr. Obama demonstrated that his and his party's priority is to prevent the Bush tax cuts from expiring for most Americans. But he might be forfeiting some leverage in the coming fiscal battles early next year over extending the debt limit. Many Republicans are threatening to withhold support for increasing that limit, as they did in 2011, without Mr. Obama's agreement to deep reductions in spending for Medicare and Social Security.

By both sides' reckoning, Mr. Obama would have a strong hand in the debt-limit debate if it remained tied to the tax issue, given Republicans' zeal to avoid tax increases.

Mr. Obama, in his statement, pressed for conciliation: "With their votes, the American people have determined that governing is a shared responsibility between both parties," he said. "In this Congress, laws can only pass with support from Democrats and Republicans. And that means nobody gets 100 percent of what they want."

nation


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