Hammered in the Senate, Democrats must negotiate on tax cuts

After two Saturday votes, Obama and Democrats in Congress are forced to negotiate over Bush-era tax cuts, now more likely to be extended for all Americans – including the wealthy.

Washington Saturday was a picture of frustration and gridlock over government spending and taxes.

But the lack of specific legislative progress also brought signs that the negotiating parties – Republicans and Democrats, Congress and the White House – may be headed for some sort of compromise.

Still, Republicans definitely have the upper hand – at least in the short run. Time (and the 2012 elections) will tell whether GOP lawmaker’s focus on tax breaks for the wealthy is a political winner or not. Judging by the increased grumbling on his left flank, it cannot be a happy time for President Obama – particularly in the wake of the “shellacking” he took in last month’s midterm elections.

Specifically, two Saturday votes in the Senate did not go well for Democrats.

The first would have let expire the Bush-era tax cuts for individuals with incomes above $200,000 (and for couples filing jointly and earning more than $250,000 a year). That fell seven votes short of the 60 needed to block a filibuster (including five Democrats). As he has since first running for the White House, Obama wanted to limit those tax cuts to poor and middle-class Americans – the position approved by the House earlier in the week.

The second vote Saturday would have extended the tax cuts for those making less than $1 million a year. That, too, fell seven votes short of passage.

Just back from a quick and unannounced trip to Afghanistan, Obama said, “We need to redouble our efforts to resolve this impasse in the next few days to give the American people peace of mind that their taxes will not go up on January 1.”

“I continue to believe that it makes no sense to hold tax cuts for the middle class hostage to permanent tax cuts for the wealthiest 2 percent of Americans, especially when those high income tax cuts would cost an additional $700 billion that we don't have and would add to our deficit,” Obama told reporters.

For their part, GOP leaders called the Saturday session a “dog and pony show” (Sen. Charles Grassley) and “a total waste of time” (Senate Minority Leader Mitch McConnell).

If anything, Democrats were even more frustrated. Sen. Charles Schumer said many in his party are prepared to fight the issue into 2011, even if it means tax cuts expire for all income levels.

But that doesn’t seem likely to happen, particularly given the resignation with which the Obama White House is facing negotiations with newly invigorated Republicans.

Treasury Secretary Timothy Geithner, and White House budget director Jacob Lew are the lead negotiators with senior House and Senate members of both parties.

It’s a situation Obama and congressional Democrats will have to get used to.

“In the end, the Republicans look certain to get what they want – extension of all the Bush tax cuts,” writes Monitor congressional correspondent Gail Russell Chaddock. “While they will remain the minority when the new Senate convenes next year, Republicans will gain six seats, meaning Democrats will need to compromise to get anything done.”