President Obama proposed a compromise on Monday on the political issues of tax cuts. He described an agreement that would extend all of George W. Bush’s reductions that are set to expire the end of this year & continue unemployment benefit for 13 months.
Obama announced to lawmakers Saturday that "Our recovery will be strengthened or weakened based on the choice that now rests with Congress." The plan is being supported by Republicans because it would not impose higher taxes on even the wealthiest Americans. Democrats are objecting because they believe it is too generous to the rich.
Obama said that both parties will have to accept a few things they don’t agree with. But he believes that it will help middle-class families that don’t deserve any extra hardships. "The opportunity for families to send their kids to college hinges on this debate," Obama said. "The ability of parents to put food on the table while looking for a job depends on this debate." Obama says he is confident that Congress "will do the right thing."
Obama has said he is willing to compromise on extending the Bush-era tax cuts, but has threatened to veto if the deal doesn’t include an unemployment extension. "Here’s what I am confident about….that nobody, Democrat or Republican, wants to see people’s paychecks smaller on January 1st because Congress didn’t act," Obama said.
Senator Orrin Hatch, R-Utah said "Let’s take care of the unemployment compensation even if it isn’t backed up by real finances. We’ve got to do it. So let’s do it. But that ought to be it." On average about 2 million unemployed workers will run out of benefits this month if they are not renewed, and the administration estimates 7 million will be affected if they don’t extend payments for another year.
The White House wants the renewal of many other tax provisions that are expiring including the bill. Any deal would require the approval of the House and Senate, and the president’s signature. Saturday Obama told Democratic congressional leaders that he would oppose any extension of tax rates that did not include jobless benefits and other assistance his administration was seeking.
The movement toward a possible compromise come after Republicans blocked Democratic efforts in the Senate on Saturday to extend the current tax rates on all but the highest income levels. Republicans prefer the extension of all the tax rates indefinitely, but that cannot win legislative approval either. Even if it did Obama would veto for sure.
As part of a compromise, the Obama administration prefers a two-year extension of the tax rates. Officials say a one-year extension would put Congress and the president in the midst of a similar debate in just 6 months. A 3-year extension, officials say, would cost too much & lose support from liberals.
An agreement on temporary extension of all the current rates and breaks would represent a breakthrough after months of partisan infighting. It would signal lawmakers’ intent to avoid the public outrage that could result if the two sides failed to reach a tax deal this month. Many retailers and economists worry that the tax increase could lower household spending and further weaken employment and the fragile recovery.
