Don’t topple economy by rejecting tax deal, Obama tells the Democrats

President Obama warned his fellow Democrats on Wednesday that they risk plunging the country into a double-dip recession if they reject his tax-cut deal with Republicans.

As the White House intensified pressure on the president’s own party, and treated the package as a fait accompli, the Senate appeared to move toward passing it swiftly.

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But momentum built against the deal among Speaker Nancy Pelosi’s (Calif.) House Democrats, who are enraged by several provisions that have businesses and the wealthiest income earners cheering.

“I’m not sure this bill can pass in this form in the House of Representatives,” Rep. Chris Van Hollen (D-Md.), who is representing House Democrats in tax talks with the administration and Senate negotiators, said Wednesday in an interview on MSNBC.

Van Hollen said Democrats were stunned that Obama agreed to set the estate tax at 35 percent and apply it only to inheritances over $5 million.

“This provision makes it very, very difficult for me to support it in its current form,” he said.

House Financial Services Committee Chairman Barney Frank (D-Mass.) on Wednesday said he opposes the proposal, but believes it will pass.

The White House’s economic arguments are resonating with Democrats in the Senate, where several senators and senior Democratic aides predicted the deal would pass despite the filibuster planned by Sens. Bernie Sanders (I-Vt.) and Jim DeMint (R-S.C.).

Even Senate critics of the deal haven’t ruled out voting for it, and say it will probably pass the upper chamber.

“I was inclined to vote no, but it’s still a work in progress,” said Sen. Tom Harkin (D-Iowa). “Let’s see what happens; things are happening.”

Senate Republican Leader Mitch McConnell (Ky.) has said he expects the vast majority of his conference to support the tax framework, which means Reid needs to corral only about 25 votes.

About a dozen Democratic senators have already spoken favorably of the package or pledged their support, including Sens. Jim Webb (Va.), Michael Bennet (Colo.), Evan Bayh (Ind.), Bill Nelson (Fla.), Ben Nelson (Neb.), Max Baucus (Mont.), Tom Carper (Del.) and Joe Lieberman (Conn.), an Independent who caucuses with Democrats.

As of Wednesday afternoon, only two Democrats had said they would vote against the tax package: Sanders, the other Independent who caucuses with Democrats, and Sen. Mark Udall (D-Colo.). Sen. Patrick Leahy (D-Vt.) has also strongly criticized the deal as “wrong for most Vermonters” and “wrong for our country.”

In the House, at least 34 Democrats have signed a letter circulated by Rep. Peter Welch (D-Vt.) stating their staunch opposition to extending tax cuts for the nation’s wealthiest individuals and families.

Obama’s White House started a full-court press on the agreement Wednesday that included a meeting between House Democrats and Vice President Biden.

House Democrats emerged from the meeting saying Biden told them the agreement essentially was final.

“It’s up or down,” Biden told them, according to Rep. Yvette Clarke (D-N.Y.)

Senior advisers to Obama told wavering Democratic lawmakers the tax package will speed the recovery and warned that failure to pass it would have disastrous consequences for the economy.

In a memo circulated to reporters, the White House claimed that if all the Bush tax cuts were allowed to expire, taxes for an average family would rise by $3,000 and economic growth would shrink by as much as 1.7 percent.

Passing the tax package crafted by Obama and GOP leaders could act as a second stimulus package, and White House officials are circulating projections that it could help add 1.5 million to 2 million jobs to the economy.

“We could expect to see more job growth in 2011 and 2012 than they originally anticipated,” Obama told reporters in the Oval Office on Wednesday.

Senate Budget Committee Chairman Kent Conrad (D-N.D.), citing projections from economist Mark Zandi, warned that failure to pass the package would reduce economic growth by as much as 50 percent next year.

Conrad said he opposed the deal Obama and Republicans struck on the estate tax and would prefer to tax estates above $3.5 million at a 45 percent rate. But he conceded that significant revisions to the package are unlikely.

Harkin would like to see unemployment benefits extended for two years, instead of 13 months, as Obama and GOP leaders have agreed. He said the extension of benefits should mirror the two-year extension of tax cuts for the wealthy.

Harkin said he was strongly opposed to setting the estate tax at 35 percent for inheritances over $5 million but also doubts the deal can be renegotiated.



In another sign that the package could move forward, Democratic senators have turned their attention to adding smaller provisions as sweeteners.


Sen. Ron Wyden (D-Ore.) is leading a push to extend authority for the Build America Bonds program to the deal. Under the program, the federal government reimburses local and state governments a percentage of the interest they pay on municipal bonds.

Sen. Chris Coons (D-Del.), who supports the effort, says every dollar spent on the program leverages more than $10 in economic activity.

Ten senators have already signed a letter to Reid and McConnell asking them to “include an extension of the Build America Bonds program” as they work on the finishing touches to the compromise.

Sen. Sherrod Brown (D-Ohio) is pushing for the extension of the 1603 tax-grant program for the solar and wind energy industries. He would also like to add Health Coverage Tax Credits, which pay as much as 80 percent of healthcare premiums for qualified individuals, to the deal.

Brown, who has been a staunch opponent of extending tax cuts for families earning over $250,000, has not ruled out voting for the tax package. The Ohio senator is up for reelection in 2012.

“There are a lot of good things for a lot of working poor and working low-income people,” he said, while reiterating he opposes the extension of tax cuts for the rich.

Russell Berman contributed to this article.