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Friday, December 17, 2010

Tax Compromise Survives US House, Goes to White House For Signature

Obama’s tax compromise with the GOP survived liberal opposition in the House, late last night.

Congress approved the most significant tax bill in nearly a decade late Thursday, overcoming liberal resistance to continue for two more years tax breaks enacted under president George W. Bush and to provide a fresh boost of federal support to the tepid economic recovery.

The package, brokered by President Obama and Republican leaders in the wake of the November elections, angered many Democrats, who have long argued that the Bush tax cuts were skewed to benefit the wealthy. But their last-minute campaign to scale back the bill's benefits for taxpayers at the highest income levels failed, and the House passed the measure 277 to 148, with 112 Democrats and 36 Republicans voting "no."

"This bill, the president of the United States believes and I believe, will have a positive effect on the economy," said House Majority Leader Steny H. Hoyer (D-Md.). "I will vote for this bill because I don't want to see middle-income working people in America get a tax increase, because I think that will be a depressant on an economy that needs to be lifted up."

The $858 billion package now goes to the White House. With his signature expected as soon as Friday, Obama will prevent taxes from rising on New Year's Day for virtually every American household. The measure also will guarantee unemployed workers in hard-hit states up to 99 weeks of jobless benefits through the end of next year. And it will create major new incentives for business and consumer spending in 2011, including a two-percentage-point reduction in the Social Security payroll tax that would let workers keep as much as $2,136.

The package breezed through the Senate earlier this week on a vote of 81 to 19, giving Obama his strongest bipartisan victory on a major initiative since he took office.

This was a bit of a victory for both sides, really. The GOP was able to get all of the tax rates extended for two years, and Obama and the Democrats were able to get unemployment compensation extended for another year.

However, what ever benefit that Obama would have received from being able to broker this compromise was largely negated, when he called the Republicans “hostage takers” and Democrats “sanctimonious”.

While some on the right might argue that it would have been better to let the tax cuts lapse, in order to get a better deal, next year, when the Republicans gain control the House and get stronger in the Senate. However, I don’t believe that letting taxes go up, even if it is just for a month, is a good idea, when we are still struggling economically. It could have been a disaster and cause businesses to panic, and unemployment could have gone up a few points. This was the best thing that we could do, at this point in time.

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