PRESIDENT BARACK Obama has come under severe criticism from liberal Democrats for what they see as his capitulation to Republicans on tax cuts for the rich.
The Washington Post revealed yesterday that the White House is holding back-channel negotiations with the office of the Senate minority leader, Mitch McConnell.
The likely outcome of the talks will be the extension of the so-called Bush tax cuts for all Americans, in exchange for Republican support for renewing benefits for up to 7 million Americans who have been unemployed for more than six months.
The long-term benefits expired this week, and Republicans have said they will not extend them unless funding is cut elsewhere to compensate for the payments.
“At the same time that they deny assistance for out-of-work Americans, Republicans are pushing for more tax breaks for millionaires,” said the Senate majority leader Harry Reid.
Another, official set of talks continues between treasury secretary Tim Geithner, White House budget chief Jacob Lew and the Republican leadership.
The Republicans are holding all other pending legislation – including the New Start arms treaty with Russia, immigration reform and repeal of the military’s “don’t ask don’t tell” policy – hostage to the tax reductions.
Disgruntled Democrats say that ending tax cuts for the rich is too important a policy issue to be sacrificed for the arms treaty, which Mr Obama has made his top foreign policy priority for the lame duck session.
The White House press secretary, Robert Gibbs, all but admitted surrender on the tax issue in a statement saying, “The President continues to believe that extending middle class tax cuts is the most important thing that we can do for our economy right now ... But, because Republicans have made it clear that they won’t pass a middle class extension without also extending tax cuts for the wealthy, the president has asked Director Lew and Secretary Geithner to work with Congress to find a way forward.”
“In the great game of tax chicken that has been raging for a year, the White House appears to have blinked,” said an opinion piece in the conservative Wall Street Journal.
The Democrats, who retain a majority in the House until the end of the year, have resorted to holding symbolic votes on the tax issue.
On Thursday, the House voted 234 to 188 to extend the Bush era tax cuts only for families earning less than $250,000 a year. This was long the Obama administration’s official policy.
The vote, a quixotic gesture intended to force Republicans to go on the record against the middle classes, was derided by the Republican speaker-elect John Boehner as “chicken crap”.
The House Bill has no hope of passing the Senate, where Sen Reid has scheduled an unusual Saturday session today.
Another tax bill, which would extend the cuts only for Americans earning less than a million dollars a year, was proposed by the Democratic senator Charles Schumer, but will also fail to pass today.
Many Democrats do not understand why the White House did not embrace Senator Schumer’s proposal, which seeks to portray the Republicans as friends of millionaires.
Reuters adds: US employment barely grew in November and the jobless rate unexpectedly hit a seven-month high, hardening views that the Federal Reserve would be likely to stick to its $600 billion plan to shore up the weak recovery.