Obama facing tough sell in own party on tax deal

WASHINGTON (AP) — President Barack Obama on Wednesday rejected claims that he betrayed Democrats by cutting a deal with Republicans on Bush-era tax cuts and implored his party to back the compromise, arguing it could jump-start the economy.

Speaking to reporters at a joint appearance with Polish President Bronislaw Komorowski, Obama said economists predict higher job growth in 2011 and 2012 if Congress passes the agreement and urged lawmakers to examine the details of the deal and "get this done."

The White House has been leaning hard on fellow Democrats to support the tax deal that would extend the cuts at all income levels for two years, extend jobless benefits for the long-term unemployed and cut the Social Security payroll tax for a year.

But House Democratic leaders protest that the overall package gives up too much to the wealthy. They're putting Obama on the defensive, even as the deal picks up support among GOP lawmakers and business groups.

The president forcefully rejected suggestions he had abandoned his allies to strike an agreement with the GOP.

"I think it is inaccurate to characterize Democrats, writ large, as quote-unquote betrayed," he said.

Obama was sending Vice President Joe Biden to Capitol Hill Wednesday afternoon to urge resistant House Democrats to support the package. Biden lobbied Senate Democrats on Tuesday.

Some Democrats are unhappy that Obama agreed to extend expiring tax cuts not just for the middle class but also for higher earners, and that he agreed to impose a lower estate tax on wealthy heirs. Both provisions are seen by many Democrats as giveaways to the rich that will do little to help the economy.

In return, Democrats would get extended jobless benefits for people who have been unemployed for long stretches. Workers would also see their share of Social Security payroll taxes cut by nearly a third for the coming year, a boost in take-home pay meant to encourage spending and aid the economy.

"So far, the response has not been very good," House Speaker Nancy Pelosi said. She called the estate tax provision "a bridge too far."

If Democrats kill the package, it would mark a stunning defeat for Obama and a huge political bet that voters will blame Republicans as much as Democrats for an impasse that would lead to higher taxes starting Jan. 1. Many congressional insiders doubt that Democrats will take that gamble. But liberal lawmakers' discontent is hard to measure in the wake of last month's big election setbacks.

The potential for additional job growth was a key talking point at the White House Wednesday and officials released independent economic analyses that supported their contention that the agreement would contribute to economic expansion.

"This is the right thing to do," Obama said. "I expect everybody to examine it carefully. When they do, I think they're going to feel confident that this is the right course — while understanding that for the next two years, we're going to have a big debate about taxes."

Senior White House adviser David Axelrod said Wednesday he believes disenchanted Democrats will decide to vote for the package when they realize how angry voters will be "if they wake up on Jan. 1" with a substantial tax increase, roughly $3,000 a year for a typical family.

He said Obama had no choice but to accede to Republican demands for continuing existing rates for the wealthy in order to spare higher rates for the middle class. He also said the president was forced to make concessions to protect the jobless.

In an interview on NBC's "Today" show, he said it would be "borderline immoral" to allow taxes to go up in the midst of economic hard times.

If Congress fails to act this month, taxpayers at every income level face a significant tax increase at the start of the year. The new Congress — with Republicans controlling the House and Democrats the Senate — still could extend the tax cuts retroactively next year. But that would make it difficult for employers to withhold the proper amount of taxes from workers' pay.

Payroll companies say it's already too late for many employers to adjust withholding by the start of the year, meaning many workers will have to make adjustments, regardless of what Congress does.

Despite their minority status, Senate Republicans last week blocked Obama's long-promised bid to end Bush-era tax cuts for households earning more than $250,000. Republicans insisted that all the tax cuts be extended, for rich and poor alike.

Under the proposal cutting back Social Security payroll taxes, workers would pay a 4.2 percent tax rate instead of 6.2 percent — a $120 billion tax cut for workers, starting on Jan. 1.

Households making between $40,000 and $50,000 would get an average tax cut of $810 next year, according to an analysis by the Tax Policy Center, a Washington research group. Households making between $100,000 and $200,000 would get an average tax cut of $2,162.

The package would continue other programs such as enhanced tuition tax credits and tax breaks for businesses that hire new workers. It would impose a 35 percent federal estate tax, but each spouse could exempt up to $5 million from taxation.

Under current law, the estate tax, which was repealed for 2010, is scheduled to return next year with a top rate of 55 percent.

Officials said that, overall, the proposal could increase federal borrowing by $900 billion.

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Associated Press writer Jim Kuhnhenn contributed to this report.

Nancy Pelosi
Alex Brandon

House Speaker Nancy Pelosi, D-Calif., speaks to the media after House democratic caucus meeting on Capitol Hill in Washington, Tuesday, Dec. 7, 2010.(AP Photo/Alex Brandon)

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