Deal on Tax Cuts and Unemployment Benefits Imminent

Deal on Tax Cuts and Unemployment Benefits Imminent

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Reports out of Washington at the top of the week indicate Democrats and Republicans are within a hair’s length of a deal on the controversial Bush-era tax cuts.  Hints of a deal were apparent last week as Congress busily pushed through a mountain of legislative items as the end of the lame-duck session looms near.

Details were still fairly fresh on Monday, but the general portrait included a significant symbolic victory for base-appeasing Republicans who did not want the cuts expiring in 2011 – while Democrats could only grumble in bittersweet relief as the GOP, in exchange for the tax cut deal, agreed to an extension of unemployment benefits.  President Barack Obama, struggling to break through the impasse in an effort to restore jobless insurance for millions of Americans, was forced to break one of his key campaign promises not to extend the Bush tax cuts.

Nothing official is being placed on the public table as of yet, but a series of Sunday talk show appearances by Senate GOP leaders seemed to signal the opening of a larger compromise.

“Obviously, the president won’t sign a permanent extension of the current tax rates,” Senate Minority Leader Mitch McConnell (R-KY) said on NBC’s Meet the Press. “So we’re going to have some kind of extension. I’d like one as long as possible.”  Shortly thereafter, the famously blink-less senior Republican from Kentucky dropped a carefully worded, cautious statement that he believed “… we will extend unemployment compensation. We’re working on that package.”

Republican Minority Whip Sen. Jon Kyl (R-AZ) appeared to lean in the same direction, telling Bob Schieffer on CBS’s Face the Nation that he thought “… most folks believe that the recipe would include at least an extension of unemployment benefits for those who are unemployed and an extension of all the tax rates for all Americans for some period of time.”

In the tenebrous, smoke-signal fashion typical of Sunday talk show exchanges, Democratic Senate Majority Whip Richard Durbin (D-IL) seemed amenable to the idea, but diffident. “I can tell you that without unemployment benefits being extended, personally, this is a non-starter,” Durbin said. “The notion that we would give tax cuts to those making over $1 million a year – which is the Republican position – and then turn our backs on 2 million Americans … is unconscionable.”

Last week, the tone on Capitol Hill grew increasingly tense as partisan rancor returned seemingly moments after Congressional Republicans met with the president in their first attempt at post-election comity.  All fingers pointed to disagreements over tax cuts as the culprit, with the GOP digging in its heels for a universal extension while Democrats argued that the rates should only apply to individuals making under $250,000.  In an eleventh hour vote over the weekend, Democrats found two of their proposals rejected by the Senate, including tax cuts for those making under $250,000 and another proposal which raised the ceiling to $1 million.

Some observers, however, pointed to the Saturday vote as a sign a deal was in the making. “Democrats have a base, too,” says one anonymous insider familiar with the inner-workings of the debate. “And, the vote allowed them to save face.  They knew all week they’d be passing the tax cuts, they just had to find a way to make it seem as though they fought the good fight.”

It seemed to go the same way for Republicans, who also ended up doing some bending of their own on an unemployment benefits extension.  Many conservatives, especially on the House side, will not be too pleased with the Senate deal.  It underscores internal tensions within the GOP that are showing in the relationship between the two chambers.

But, most observers agreed that the stakes got higher on Friday when unemployment numbers released by the Department of Labor showed a sharp increase in the jobless rate, from the official 9.6% in October to 9.8% in November.  The struggling economy only added a paltry 30,000 jobs.  With no end in sight for what President Obama called “the new normal” during a 60 minutes interview several weeks ago, Republicans were forced to yield on the unemployment benefits.  If benefits are not extended, nearly 2 million unemployed Americans could stop receiving the average $310.00 weekly check by Christmas and another 6 million will lose benefits by Spring 2011.

“While the overall trend of economic data over the past two months has been encouraging, today’s numbers underscore the importance of extending expiring tax cuts for the middle class and unemployment insurance for those Americans who have lost their jobs,” said Austan Goolsbee, Chair of the White House Council of Economic Advisers, on Friday.  “Failure to do this would jeopardize hundreds of thousands of additional jobs, and leave millions of Americans, who are out of work through no fault of their own, on their own.”

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