Dems drop millionaires tax in year-end dispute

DAVID ESPO

AP Spe­cial Correspondent

WASHINGTON — Democ­rats backed away from their demand for higher taxes on mil­lion­aires as part of leg­is­la­tion to extend Social Secu­rity tax cuts for most Amer­i­cans on Wednes­day as Con­gress strug­gled to clear crit­i­cal year-end bills with­out trig­ger­ing a par­tial gov­ern­ment shutdown.

Repub­li­cans, too, sig­naled an eager­ness to avoid grid­lock and adjourn for the hol­i­days. With a bipar­ti­san $1 tril­lion fund­ing bill blocked at the last minute by Democ­rats, GOP law­mak­ers and aides floated the pos­si­bil­ity of a backup mea­sure to run the gov­ern­ment for as long as two months after the money runs out Fri­day at midnight.

In a writ­ten state­ment late Wednes­day, White House Com­mu­ni­ca­tions Direc­tor Dan Pfeif­fer said the admin­is­tra­tion objected to sev­eral envi­ron­men­tal, finan­cial and other pro­vi­sions in the mam­moth spend­ing bill and said Con­gress should approve a short-term spend­ing mea­sure to avoid a fed­eral shut­down and give law­mak­ers time to iron out their final disputes.

With time begin­ning to run short, Sen­ate Major­ity Leader Harry Reid, D-Nev., met with Pres­i­dent Barack Obama at the White House, then returned to the Capi­tol and sat down with the two top Repub­li­cans in Con­gress, Speaker John Boehner and Sen. Mitch McConnell of Kentucky.

Taken together, the devel­op­ments sig­naled the end game for a year of divided gov­ern­ment — with a tea party-flavored major­ity in the House and Obama’s allies in the Sen­ate — that has veered from near-catastrophe to last-minute com­pro­mise repeat­edly since last January.

The rhetoric was bit­ing at times.

“We have fid­dled all year long, all year,” McConnell com­plained in a less-than-harmonious exchange on the Sen­ate floor with Reid. He accused Democ­rats of “rou­tinely set­ting up votes designed to divide us … to give the pres­i­dent a talk­ing point out on the cam­paign trail.”

Reid shot back that McConnell had long ago declared Obama’s defeat to be his top pri­or­ity. And he warned that unless Repub­li­cans show a will­ing­ness to bend, the coun­try faces a gov­ern­ment shut­down “that will be just as unpop­u­lar” as the two that occurred when Newt Gin­grich was House speaker more than a decade ago.

It was a reminder — as if McConnell and cur­rent Speaker John Boehner of Ohio needed one — of the polit­i­cal deba­cle that ensued for Repub­li­cans when Gin­grich was out­ma­neu­vered in a show­down with for­mer Pres­i­dent Bill Clinton.

At issue now are three year-end bills that Obama and lead­ers in both par­ties in Con­gress say they want. One would extend expir­ing Social Secu­rity pay­roll tax cuts and ben­e­fits for the long-term unem­ployed, pro­vi­sions at the heart of Obama’s jobs pro­gram. Another is the $1 tril­lion spend­ing mea­sure that would lock in cuts that Repub­li­cans won ear­lier in the year. The third mea­sure is a $662 bil­lion defense bill set­ting pol­icy for mil­i­tary per­son­nel, weapons sys­tems and the wars in Iraq and Afghanistan, plus national secu­rity pro­grams in the Energy Department.

After a two-day silence, the White House said Obama would sign the mea­sure despite ini­tial con­cern over a pro­vi­sion requir­ing mil­i­tary cus­tody of cer­tain ter­ror sus­pects linked to al-Qaida or its affil­i­ates. U.S. cit­i­zens would be exempt.

The mea­sure cleared the House, 283–136, with a final vote expected Thurs­day in the Senate.

Offi­cials said Democ­rats were draft­ing a new pro­posal to extend the pay­roll tax that likely would not include the mil­lion­aires’ sur­tax that Repub­li­cans opposed almost unanimously.

Repub­li­cans min­i­mized the sig­nif­i­cance of the move. “They’re not giv­ing up a whole lot. The tax they wanted to imple­ment on busi­ness own­ers was some­thing that couldn’t pass the House and couldn’t pass the Sen­ate,” McConnell said in a CNBC interview.

Jet­ti­son­ing the tax could also require Democ­rats to agree to polit­i­cally painful sav­ings else­where in the bud­get to replace the esti­mated $140 bil­lion the tax would have raised over a decade.

In its most recent form, the sur­tax would have slapped a 1.9 per­cent tax on income in excess of $1 mil­lion, with the pro­ceeds help­ing pay for the exten­sion of tax cuts for 160 mil­lion work­ers. Sen­ate Democ­rats have twice forced votes on the pro­posal in what offi­cials have described as a polit­i­cal maneu­ver designed to force GOP law­mak­ers to choose between pro­tect­ing the wealthy on the one hand and extend­ing tax cuts for mil­lions on the other.

The spend­ing bill was hung up — and there was no agree­ment why.

Repub­li­cans and at least one Demo­c­rat said agree­ment had been reached ear­lier in the week, but Reid dis­puted that and pointed to pro­vi­sions relat­ing to travel to Cuba and fund­ing for the Com­modi­ties Future Trad­ing Com­mis­sion as examples.

“It’s pretty clear to all of us that Pres­i­dent Obama and Sen. Reid want to threaten a gov­ern­ment shut­down so they can get lever­age” on the pay­roll tax bill, said Boehner, not­ing that so far, the Sen­ate has failed to pass leg­is­la­tion on the issue.

Wednesday’s maneu­ver­ing occurred the day after the House passed a pay­roll tax exten­sion that con­tained no higher taxes. That House mea­sure drew a veto threat from Obama that cited spend­ing cuts the White House said would harm the mid­dle class with­out requir­ing a sac­ri­fice from the wealthy.

The bill would extract nearly $43 bil­lion from the year-old health care bill; extend a pay freeze on fed­eral employ­ees while also increas­ing their pen­sion con­tri­bu­tions and raise Medicare pre­mi­ums on seniors with incomes over $80,000 begin­ning in 2017. It also would raise a fee that is charged to banks whose mort­gages are guar­an­teed by Fan­nie Mae and Fred­die Mac.

Obama’s veto mes­sage also alluded to a require­ment for the con­struc­tion of an oil pipeline from Canada to Texas that Repub­li­cans said would cre­ate 20,000 jobs. The pro­vi­sion is designed to force the administration’s hand, since Obama announced recently that despite three years of review under two admin­is­tra­tions, he was putting off a deci­sion until after the election.

The mea­sure would per­mit Obama to block the Key­stone XL project if he deemed its con­struc­tion to be not in the national interest.

The House-passed bill also includes an exten­sion of unem­ploy­ment ben­e­fits that would scale back what is cur­rently in place. The White House said 3.3 mil­lion peo­ple would be cut off under its terms. Another part of the bill, to block pro­posed reg­u­la­tions lim­it­ing toxic emis­sions from indus­trial incin­er­a­tors, drew objec­tions from the White House.

The leg­is­la­tion would avert a threat­ened 27 per­cent cut in pay­ments to doc­tors who treat Medicare patients, and Obama and Democ­rats are will­ing to accept that.

Posted by AP News on Dec 14 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.