A DEMOCRATIC revolt against the tax plan which the White House negotiated over a period of weeks with the Republican leadership escalated yesterday when the House Democratic caucus refused to support the Bill in its current form.
House speaker Nancy Pelosi, usually President Barack Obama’s staunchest ally, sided with the caucus against him, saying she would not bring the tax agreement to the floor for a vote in its present form. “The message today is very simple,” said Democratic representative Chris Van Hollen, an aide to Ms Pelosi. “That in the form it was negotiated, it is not acceptable to the House Democratic caucus. It’s as simple as that.”
Republican leaders have said a logjam of legislation ranging from the new Strategic Arms Reduction Treaty (Start) to partial immigration reform and an end to discrimination against gays in the military cannot be addressed before Bush-era tax cuts are extended. If Congress does not act, the cuts will expire on December 31st.
Congressional leaders had hoped to begin their Christmas recess on December 17th. But the Democratic revolt makes it more likely the session could continue until Christmas Eve.
President Obama announced at the beginning of the week that the White House had reached agreement with Senate minority leader Mitch McConnell to extend all Bush-era tax cuts for two more years.
Mr Obama had long promised to end tax breaks on income exceeding $250,000 (€189,000) a year.
Estate tax of 55 per cent was due to have been restored next year on estates over $1 million. But to the consternation of Democrats, Mr Obama also accepted the second-lowest estate tax in 80 years. Under the agreement, estates of more than $5 million will be taxed at 35 per cent.
In exchange for a two-year extension of all tax reductions, Mr Obama obtained a 13-month extension of long-term unemployment benefits. While congressional Republicans generally support the agreement, Democrats are angry that they were left out of negotiations and accuse Mr Obama of conceding too much, too fast, to Republicans.
The White House has spent the entire week attempting to quell the Democratic revolt. On Tuesday, Mr Obama criticised “sanctimonious” Democrats who want to “feel good about . . . how pure our intentions are” and likened the Republicans to “hostage-takers” for holding middle-class tax cuts and unemployment benefits hostage to tax cuts for the rich.
“I think it’s inaccurate to characterise Democrats at large as feeling, ‘betrayed’, ” the president said on Wednesday.
Over the past two days, the White House has recast the tax plan as a second stimulus initiative. Failure to approve the tax scheme could “increase the risk that the economy would stall out and we would have a double dip ”, Larry Summers, Mr Obama’s economic adviser, warned Congress.
Vice-president Joe Biden went to Capitol Hill on Wednesday evening in a failed attempt to win the support of the Democratic caucus. He told lawmakers that the plan could not be changed, but the vice-president’s warning was ignored by House and Senate Democrats. Senate majority leader Harry Reid said he was working on revisions that “would make the Bill much better”. In its campaign for the tax plan, the White House is e-mailing a constant stream of endorsements from Democratic mayors and governors, who cannot vote for the Bill.
Governor Martin O’Malley of Maryland said: “The president understandably felt a responsibility to protect millions of families who were about to have their life-line cut off by House Republicans in their blind zeal to secure ever deeper and longer-lasting tax cuts for millionaires.”
Meanwhile, former president George Bush – who won Senate approval of the original Start agreement with the former Soviet Union in 1991 – has endorsed the new Start pact.
For the treaty to pass, at least nine Republican Senators must vote for it.
The House on Wednesday passed a “continuing resolution” to fund the US government until next September, and the Dream Act, which would allow illegal immigrants who came to the US before age 16 and who attend university or serve in the military to gain legal status.
The Senate must approve the budget resolution by December 17th to avoid a government shut-down.
Republicans yesterday blocked an attempt by Mr Reid to bring the Dream Act to a vote in the Senate.