Swonk Says Payroll Tax Cut Could Add to U.S. Growth

December 9, 2010

Washington Post

Lori Montgomery and Shailagh Murray

Senate leaders are planning to begin debate on a far-reaching tax package as soon as Thursday as rank-and-file Democrats warm to an agreement between the White House and Republicans to extend a host of expiring tax cuts and pump fresh cash into the economy.

Democrats were still angry Wednesday about what they viewed as President Obama's capitulation to GOP demands to preserve tax cuts for the wealthiest Americans, particularly a deal to exempt estates worth as much as $10 million from a revived inheritance tax. But lawmakers said the magnitude of the concessions Obama won came into sharper focus Wednesday as the White House highlighted independent forecasts predicting that the package could create as many as 2.2 million jobs next year.

For a second day in a row, White House officials made the rounds on Capitol Hill, stressing the economic significance of their deal with Republican leaders to preserve tax cuts that are set to expire on New Year's Eve, extend long-term unemployment benefits through next year, and create major new tax breaks for businesses and individuals aimed at spurring investment and consumer spending.

While Vice President Biden and House Democrats met into the evening, White House budget director Jacob Lew and senior Treasury adviser Gene Sperling held an afternoon session to field questions from Senate Democrats, who were more accepting of the package than they were a day earlier in a meeting with Biden, participants said.

"Members are more open today as they read the analyses of this package," said Sen. Richard J. Durbin (Ill.), the chamber's No. 2 Democrat. Citing prominent liberals such as John Podesta, head of the Center for American Progress, and Robert Greenstein, executive director of the Center on Budget and Policy Priorities, who endorsed the White House plan, Durbin said, "These are people that progressives respect and go to, and they've said positive things."

Durbin added that "I just loathe" parts of the deal, such as the provision on the estate tax. But he said: "I understand the predicament that we're in."

Biden faced a far tougher crowd in the House, where a fractious caucus dominated by angry liberals is emerging as the bigger legislative obstacle to the tax plan. During a two-hour meeting, dozens of lawmakers lined up to interrogate the vice president about the deal - almost all of them speaking in opposition, participants said.

"There remain very serious reservations on the House side. I think that there's still a very serious question whether this package can pass in the form it's in now," Rep. Chris Van Hollen (Md.) said afterward. Van Hollen represented House Democrats in bipartisan talks about the tax cuts that were rendered moot when the White House began dealing directly with Republican leaders, a slight that rankled nearly as much as Obama's decision to abandon the long-held Democratic position of opposing tax breaks for the wealthy.

Many Democrats, including Rep. James E. Clyburn (S.C.), the third-ranking House leader, emerged from the meeting saying they could not support the package unless major elements were changed, particularly the estate tax provision.

Most Democrats would prefer to renew the tax, which lapsed last year, with a 45 percent rate on estates worth more than $3.5 million for individuals and $7 million for couples. The Obama-GOP deal would impose a 35 percent tax on estates larger than $5 million for individuals and $10 million for couples for the next two years. If that change were made permanent, it would add $100 billion to deficits over the next decade, Democrats said.

In a forceful presentation, however, Biden made it clear that big changes are not in the cards. "The vice president said: 'This is the deal. Take it or leave it,' " an irritated Rep. Henry A. Waxman (Calif.) said, paraphrasing Biden.

The tax debate is a central piece of a broader strategy to wrap up the legislative session by Dec. 17. The House and the Senate are scrambling to complete unfinished business. This includes a major resolution to continue funding the federal government through Sept. 30, 2011, approved by the House on Wednesday, as well as smaller measures, such as a plan to protect doctors from a sharp cut in Medicare payments, which cleared the Senate by voice vote Wednesday night.

Obama wants the Senate to ratify the New START nuclear arms pact with Russia, but it could face time constraints, depending on whether Majority Leader Harry M. Reid (D-Nev.) can find the votes to advance a defense authorization bill that includes a repeal of the "don't ask, don't tell" policy, which bans gays from serving openly in the military. A decision on the Pentagon bill is expected Thursday.

Meanwhile, the White House embarked on an aggressive campaign to advance the tax package, issuing a series of announcements touting Democratic endorsements of the legislation. The list included Detroit Mayor Dave Bing; Michael B. Coleman, the mayor of Columbus, Ohio; Michigan Gov. Jennifer M. Granholm; Rep. Chet Edwards (Tex.); and Sens. John F. Kerry (Mass.) and Blanche Lincoln (Ark.).

In the Senate, lawmakers said they were warming to the package as they pored over the details of its provisions and reflected on the consequences of inaction: tax increases for virtually every American worker, beginning Jan. 1.

One of the first Democrats to sign on to the deal was Sen. James Webb (Va.), who is among 23 Senate Democrats facing reelection in 2012. "The proposal is the ultimate stimulus plan," Webb said in a statement. "It will put more money directly into the pockets of people and small businesses, allowing that money to be quickly recycled as the economy expands."

Lawmakers in both parties said they will seek to change the package through the amendment process. Sen. Jon Kyl (R-Ariz.) said some conservatives are pushing a plan that would cover the cost of another year of jobless benefits - about $56 billion - by cutting spending elsewhere.

Meanwhile, a bloc of Democrats was circulating a proposal to add provisions that would trigger a broad deficit-reduction plan next year if the economy improved.

"There's a legitimate case to be made for short-term stimulus," said Sen. Mark Warner (Va.). "But if you don't create a path to long-term deficit-reduction, you're just borrowing $900 billion." But he added that Congress must reach a compromise on the expiring tax cuts before adjourning for Christmas.

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