White House, Republicans strike deal on taxes, unemployment benefits

President Obama struck a deal with Republicans on Monday, announcing a two-year extension of all the Bush-era tax cuts in exchange for a 13-month extension of unemployment insurance benefits.

Calling the deal a “framework for a bipartisan agreement,” the president also said he had secured Republican support for a 2 percent cut in the payroll tax in an attempt to boost hiring.

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The president needs to convince Democratic leaders to support the compromise, which the White House negotiated behind closed doors with Senate Republicans. But he faces strong resistance from members of the liberal rank and file, many of whom have slammed the potential deal as a sellout.

The president acknowledged the anger of many Democrats on Monday, saying he is “sympathetic to those who prefer a fight over a compromise.”

But Obama said a protracted battle over the tax cuts would mean letting them expire for all Americans, an outcome he said would cost $3,000 per year for typical families and could cost more than 1 million jobs.

“The American people did not send us here to wage symbolic battles or win symbolic victories,” Obama said.

Vice President Biden briefed House Democratic leaders Monday afternoon on the contours of the agreement. Shortly before Obama spoke, however, a House Democratic leadership aide cautioned that the deal was not done.

“House Democrats have not agreed to any deal,” the aide said. “We need to present the package to the caucus and have it thoroughly reviewed and discussed.”

The GOP balked at keeping the so-called Making Work Pay Credit that was included in the stimulus, and instead accepted an administration proposal to reduce the payroll tax by two percentage points — a more expensive plan that would represent a sharper reduction in taxes for most Americans.

The deal would also let the estate tax return next year at a rate of 35 percent, though inheritances of up to $5 million for individuals and $10 million for families would be exempt.

The aide predicted that House Democrats would not have a problem with the addition of the payroll tax cut but said the concession on the estate tax, which Obama himself lamented, “may cause Democrats heartburn.”

A Democrat familiar with the negotiations said House Democratic leaders warned Biden that they “are not going to just rubber-stamp” a tax deal made by the White House.

In order to get the deal through Congress, the president or senior members of his administration might have to make the case directly to the Senate and House Democratic caucuses later this week.

“The White House is definitely going to have to speak to the caucus and make clear that the deal they cut is a good one and one the caucus should support,” said a congressional Democratic aide. “If they’re going to strike this deal, hopefully they are coming to brief the Democratic members in full on what your plan is.

 “The White House is pressing very hard to get this done by the end of the year,” the aide added.

Announcing the deal, Obama said he opposes extending the high-end tax cuts, but said it is “abundantly clear ...that Republicans” would block an extension for only the middle-class cuts.

Obama said continued stalemate would have a “chilling effect” on the economy.

He and congressional leaders last week appointed a six-person team to reach a deal on extending the Bush tax cuts.

But most heavy negotiating has been between White House officials and Senate Republicans, congressional sources say.

White House officials see the $56 billion extension of unemployment benefits as an important concession from the GOP, as  it will be harder to pass aid for the unemployed next year when Republicans control the House, Democratic sources said.

But liberal lawmakers are grumbling that the White House was too quick do a deal.

“I would hope the president would stand firm on what he campaigned on in Iowa,” Sen. Tom Harkin (D-Iowa) said last week. “I think the Republicans painted themselves in the corner...We’ve got to keep them in the corner. If they want to keep us here, I think we should stay here until Christmas Eve, Christmas Day.”

Obama met with Senate and House Democratic leaders Monday afternoon to discuss their endgame for extending the tax rates and federal unemployment benefits.

Senate Majority Leader Harry Reid (D-Nev.), Democratic Whip Dick Durbin (Ill.), Finance Committee Chairman Max Baucus (D-Mont.) and Democratic Conference Secretary Patty Murray (Wash.) attended the meeting. House Speaker Nancy Pelosi (D-Calif.) and Majority Leader Steny Hoyer (D-Md.) also attended.

Biden invited House Democratic leaders to his residence over the weekend to let them vent their complaints about the deal to Geithner and White House Chief of Staff Pete Rouse.

Obama campaigned in 2008 on a plan to allow tax rates for families earning over $250,000 to reset to the levels they were in the 1990s.

Last week, House Democrats passed legislation that would extend tax rates only for middle-class families earning $250,000 or less.

But Obama declared Monday that the time has come for Democrats to accept a deal on the Bush tax cuts, “even if it’s not 100 percent of what I want” or what Republicans want.

“I have argued that we cannot afford [tax cuts for the wealthy] right now,” Obama said during a speech in Winston-Salem, N.C. “But what I’ve also said is, we’ve got to find consensus here.”

But Democrats have pushed back, urging the president to take a tougher line.

Rep. Anthony Weiner (D-N.Y.) accused Obama of conceding too early in his negotiations with Republicans.

“Middle-class Americans need someone to fight for them. They see this deal as punting on third down — it seems the president is not seeing the value of being on offense,” Weiner said in a statement Monday.

 “Democrats should welcome the chance to tell the American people what we will fight for,” he added. “We should be standing up for the middle class and extending unemployment insurance for out-of-work Americans.”

 Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said the White House officials were committing a grave mistake to agree to a two-year extension of the Bush tax cuts.

 “I’m very disappointed in it. I think it’s gravely mistaken, and I’m sure my colleagues share that,” Frank said Thursday evening on MSNBC after rumors of a tentative deal emerged.

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