Tax-cut extension deal takes shape on Hill

The White House and Republicans in Congress edged ever closer to a deal Sunday on at least a temporary extension of all of the George W. Bush-era tax breaks that are due to expire at the end of the year.

White House senior political adviser David Axelrod and Sen. Jim DeMint, the South Carolina Republican who has emerged as a major power broker for the chamber’s ascendant conservative bloc, signaled in appearances on Sunday talk shows a willingness to cut a deal in the lame-duck session of Congress that convenes Monday.

The two sides, however, remain well short of an agreement.

With taxpayers facing major increases in their tax bills after Jan. 1, congressional Republicans have pressed for a permanent extension of all the tax cuts. Mr. Obama and congressional Democrats, citing what they say is the negative effects the cuts will have on deficits, want to preserve “middle-class” tax breaks while ending them for wealthier Americans.

Mr. DeMint, speaking on “Fox News Sunday,” said he could consider what is emerging as the leading compromise position: a full extension of the middle-class tax cuts and a “temporary” extension of the higher-end breaks as well.

“I hope we can get a permanent extension,” he said. “But … if that’s all we can get out of the president … we’ll work with him on that.”

Mr. Axelrod, who angered Democrats last week by suggesting Mr. Obama may have to back down on the issue, considering the major GOP gains in the midterm elections, talked tough Sunday, but left clear negotiating space for a short-term extension of all the Bush tax cuts.

“The bottom line is that [President Obama] wants to sit down and talk about this,” Mr. Axelrod said on NBC’s “Meet the Press.”

“There’s no bend on permanent extension of tax cuts for the wealthiest Americans,” he added, leaving room for a temporary extension.

The administration official added the White House hoped to have the tax-cut impasse resolved in the next few weeks, in part because of the uncertainty that would come if the cuts expire and in part because of the Democrats’ weaker bargaining position in the next Congress.

Mr. Obama himself told reporters on Air Force One on his way back from a 10-day Asia trip that he thought a deal could be reached that includes “making sure that taxes don’t go up for middle-class families starting January 1.”

But he also indicated he may position himself as deficit hawk in the talks, saying he wanted to hear how Republicans “intend to pay for” an extension on all tax cuts, “particularly given that they’re also saying they want to control the deficit and debt.”

Sen.-elect Rand Paul, Kentucky Republican and a likely ally of Mr. DeMint in the next Congress, said Sunday he would stand firm for a permanent extension of all the tax cuts when he takes his seat in January.

“Really, the compromise is where you find the reductions in spending,” Mr. Paul said on CBS’ “Face the Nation.” “I don’t think the compromise is in raising taxes.”

The tax-cut question dominated the Sunday talk shows and is likely to dominate the lame-duck session of Congress, which will include a large contingent of Democratic lawmakers who were defeated in their re-election bids. Lawmakers return to town Monday to debate the expiring tax cuts and deal with a Dec. 3 deadline to pass a new series of spending bills to keep the government functioning.

Other issues that might come up in the lame-duck session include a New START missile-reduction treaty with Russia and repeal of the “don’t ask, don’t tell policy” on gays in the military that Democrats have tried to insert into a major defense authorization bill.

Mr. Obama, who concluded a lengthy Asia trip Sunday, told reporters on the plane flight home that he specifically hoped to have a ratification vote in the Senate by the end of the year. The lame-duck agenda will be the top topic when Mr. Obama hosts the bipartisan congressional leadership at the White House on Thursday.

Sen. Mitch McConnell of Kentucky, who leads the Republican minority in the Senate, has introduced a bill to extend all the tax cuts permanently, but has left himself room to accept something less than that for now.

“I’m willing to listen to what the president has in mind for protecting Americans from tax increases,” Mr. McConnell said in a statement released Sunday.

Mr. Obama faces unhappiness from his own party over possible compromises on the tax-cut issue. Arguing that polls show strong voter opposition to extending the tax breaks for the “wealthy” - defined in the debate as individuals making more than $200,000 annually and households with incomes of more than $250,000 a year - House Speaker Nancy Pelosi and others have urged Mr. Obama to stand firm in the debate.

“That’s a lot of money to give a tax cut at the high end,” Mrs. Pelosi, California Democrat, said in an interview with NPR over the weekend. “Those tax cuts have been in effect for a very long time, and they did not create jobs.”

But the Democrats have not been able to present a unified front in Congress against any extension of the upper-end tax breaks, with a number endorsing the GOP argument that a tax increase for any category is the wrong approach while the economy and the jobs market remain so fragile.

Sen. Charles E. Schumer, New York Democrat, is trying to change the terms of the debate. Mr. Schumer on Sunday lobbied for a compromise that would make the tax cuts permanent for those earning less than $1 million.

The president and congressional Republicans also are positioning themselves for the expected release next month of recommendations from the bipartisan deficit reduction commission Mr. Obama created earlier this year.

A “co-chairmen’s draft,” released last week by former Clinton White House office Erskine Bowles and former Sen. Alan Simpson, Wyoming Republican, put on the table options unpalatable to both sides, including tax increases, major spending cuts, program eliminations and reductions in Social Security and Medicare benefits.

A temporary truce on the tax-cut issue may suit both sides, with Republicans awaiting reinforcements in the next Congress and the White House hoping an improving economy will strengthen its hand in the next tax-cut fights.

“It is not the time to raise anybody’s taxes,” Sen. John McCain, Arizona Republican, said on “Meet the Press.” “I think they should be extended until we are out of this recession, at which time we could look at tax hikes.”