Congress Sends
Tax Cut Bill to Obama as Logjam Ends
Published: December 16, 2010 - New York Times
WASHINGTON — Congress at midnight Thursday approved an $801 billion package
of tax cuts and $57 billion for extended unemployment insurance. The vote sealed
the first major deal between President
Obama and Congressional Republicans as Democrats put aside their objections
and bowed to the realignment of power brought about by their crushing election
losses.
The bipartisan support for the tax deal also underscored the urgency felt by
the administration and by lawmakers in both parties to prop up the
still-struggling economy and to prevent an across-the-board tax increase that
was set to occur if the rates enacted under President George
W. Bush had expired, as scheduled, at the end of the month.
Administration officials said Mr. Obama would sign the package into law on
Friday.
The final vote in the House was 277 to 148 after liberal Democrats failed in
one last bid to change an estate-tax provision in the bill that they said was
too generous to the wealthiest Americans and that the administration agreed to
in a concession to Republicans. The amendment failed, 233 to 194.
Supporting the overall measure were 139 Democrats and 138 Republicans;
opposed were 112 Democrats and 36 Republicans.
The bill extends for two years all of the Bush-era tax rates and provides a
one-year payroll tax cut for most American workers, delivering what economists
predict will be a needed lift. The Senate approved the package on Wednesday by
81 to 19.
The White House and Republicans hailed the deal as a rare bipartisan
achievement and a prototype for future hard-bargained compromises in the new era
of divided government.
But the accord also showed that policy-makers remain locked in an
unsustainable cycle of cutting taxes and raising spending that has proven
politically palatable in the short term but could threaten the nation’s fiscal
stability in years ahead.
Some Republican critics of the deal had said the Bush-era rates should be
extended permanently, complaining that to do otherwise would create economic
uncertainty. But some analysts said that such certainty was an illusion, given
the longer-term problem with the deficit.
“Republicans are talking a lot about certainty,” said Matthew Mitchell, a
research fellow and tax policy expert at George Mason University. “But even if
they had won some sort of a victory where they got the current tax rates written
in stone, spending is on such an unsustainable path in terms of entitlements, it
really isn’t certain at all.”
The temporary nature of the deal, however, could lend momentum to broader
efforts to overhaul the tax code and tackle the deficit. With the tax debate now
scheduled to resume at the height of the 2012 presidential election, some
lawmakers said they hoped the fiscal landscape could be redrawn and the cycle of
lower taxes and higher spending brought to a halt.
Throughout the debate in recent weeks, lawmakers in both parties expressed
unhappiness with the tax agreement, and that there seemed to be an increasing
recognition of a need to tackle the long-term problems.
In recent days, 22 senators — 12 Democrats, 9 Republicans and 1 independent —
signed on to a resolution pledging to “devise a comprehensive plan for
addressing the fiscal concerns of our nation” by focusing on “tax reform,
spending restraint and debt and deficit reduction” in 2011.
That pledge suggested lawmakers might want to avoid repeating this debate in
two years, and instead focus on proposals to clean up the tax code and
potentially reduce rates for individuals and corporations alike, while
simultaneously trying to bring spending in line.
“The era of deficit denial is over,” said Bruce Reed, the executive director
of Mr. Obama’s bipartisan
commission on reducing the national debt. “They’re just having a big
year-end close-out.”
Senator Tom
Coburn, Republican of Oklahoma, for example, voted against the tax deal on
Wednesday even though he is a champion of lower taxes. But Mr. Coburn, as a
member of the debt commission, voted in favor of its blueprint for reducing the
debt through 2020.
Mr. Coburn had proposed an alternative to the tax deal on Wednesday, seeking
to reduce its cost using a number of strategies endorsed by the commission.
As the House moved toward approving the tax package, liberal Democrats railed
against it and delayed the final vote by several hours after briefly objecting
to the terms of debate.
The House speaker, Nancy
Pelosi of California, accused Republicans of forcing Democrats “to pay a
king’s ransom in order to help the middle class.”
Many of the Democratic opponents said the package would do too much for the
wealthy, and warned that the payroll tax cut could undermine the stability of Social
Security.
“It’s a huge giveaway to the super-rich in tough economic times,” said
Representative Jim McDermott, Democrat of Washington, who called the plan
“craziness.”
Representative Peter Welch, Democrat of Vermont, said, “This legislation
creates too few jobs and too much debt.”
Representative Jerrold
Nadler, Democrat of New York, said he feared the one-year cut in the Social
Security payroll tax, to 4.2 percent from 6.2 percent on income up to $106,800,
would weaken Social Security because Republicans would insist on it being made
permanent, and Democrats would relent. “We know that politically once you make
that tax cut it will be impossible to restore it,” Mr. Nadler said.
Some Republican critics said the package would add too much to the deficit,
and they objected to maintaining extended jobless aid without offsetting the
cost with spending cuts elsewhere.
But most Republicans said they supported the deal.
“We are crawling out of the worst economic downturn in generations,” said
Representative Eric
Cantor, Republican of Virginia, who will be the majority leader next year.
“The choice is to act now or impose a $3.8 trillion tax increase.”
Mr. Cantor also reminded Republicans to recognize the limits of their new
House majority. “We could try to hold out an pass a different tax bill, but
there is no reason to believe the Senate would pass it or the president would
sign it if this fight spills into next year,” he said.
Even some fierce conservatives said they were putting aside reservations
about the overall cost to back the plan. “I am going to fight to put this nation
back on the road to fiscal sanity,” said Representative Jeb Hensarling,
Republican of Texas, announcing that he would vote aye.
In the Senate, Democrats on Thursday night abandoned efforts to pass a $1.2
trillion spending bill to finance the federal government through Sept. 30, and
said they would accede to Republicans demands for a short-term stop-gap measure
instead.
Senators said the stop-gap bill would run through the early part of next
year, at which point Republicans will have greater leverage over spending
decisions.
Senate Republicans had pledged to stop the spending measure, even though it
included millions of dollars for projects that they had requested, and had
threatened to force the entire bill, which is more than 1,900 pages, to be read
aloud on the Senate floor.
Mr. McConnell, in floor remarks, praised the Appropriations Committee, of
which he is a member, for its work on the spending bill that he and other
Republicans blocked.