Video: Senate compromise on taxes near

  1. Closed captioning of: Senate compromise on taxes near

    >>> now to washington and the battle over the bush era tax cuts , a compromise appears to be on the horizon. nbc's white house correspondent savannah guthrie has more on this.

    >> reporter: a deal could come as early as this morning. but some democrats are not happy about the compromise.

    >> tax cuts should go to the middle class , we should not increase taxes on anybody.

    >> reporter: after weeks of partisan wrangling over how to extend the expiring bush era tax cuts .

    >> i'm optimistic, we'll be able to come together.

    >> reporter: senator mitch mcconnell appearing on "meet the press," suggests a compromise is near.

    >> taxes are not going up on anybody during this recession.

    >> reporter: the deal is set by two democrats over the past weekend.

    >> the motion is not agreed to.

    >> reporter: the vote failed without the support of republicans. back from his trip to afghanistan, president obama weighed in after the senate vote saying now is the time for a deal.

    >> we need to redouble our efforts to resolve this impasse in the next few days to give the american people the peace of mind that their taxes will not go up on january 1. it will require some compromise. but i'm confident that we can get it done.

    >> reporter: behind the scenes senior administration officials tell nbc news that the president has drawn a new line in the sand saying he will propose even a temporary extension of the tax cuts unless unemployment benefits and other tax cuts are also extended. the president's biggest challenge remains jobs, following an unemployment report that caught the west wing and wall street by surprise, as the jobless rate jumping to 9.8%.

    >> despite 11 contest months of private sector job growth , despite creating more than 1 million private sector jobs this year, it's not enough. we have to do more to accelerate the economic recovery and create jobs for the millions of americans who are still looking for work.

    >> reporter: the president is on the road today in north carolina at a community college , once again expected to call for the extension of unemployment benefits and other middle class tax cuts to be part of any compromise this week.

By Tom Curry National affairs writer
updated 12/5/2010 11:52:56 AM ET 2010-12-05T16:52:56

Senate Minority Leader Mitch McConnell sounded optimistic on NBC’s Meet the Press Sunday that Republicans will come to an agreement with President Barack Obama that would allow current income tax rates to continue for a few years while also extending unemployment payments for people whose benefits are set to run out.

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The Kentucky Republican said that “this argument is over” on whether to extend the current tax rates which are set to expire at the end of the year.

“It’s pretty clear now that taxes are not going up on anybody in the middle of this recession,’” McConnell said. “It isn’t going to happen.”

Referring to Obama, McConnell said, “We’ve had more conversations in the last two weeks than we’ve had in the last two years and I think that’s a good sign — a growing awareness that the power is going to be more symmetrical in the next Congress. And I’m optimistic we’ll be able to come together.”

Stronger GOP bargaining position
McConnell, whose bargaining position was strengthened when the Republicans gained six Senate seats in last month’s election, said he was hopeful that Obama would turn toward the political center during the next two years.

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“Hopefully we can focus on things that we can agree on,” McConnell said. He said he was happy about the agreement Obama reached last week with South Korea on an agreement to lower trade barriers.

“I hope he pivots and starts helping us reduce spending, reduce debt, ratify trade deals…. there are things we can do together for the American people that would be very important,” the Senate GOP leader said.

Video: McConnell addresses debt panel’s plan

“I like him personally; we have different political agendas, (but) there will be some overlap,” McConnell said.

Reminded of his remark that his goal was for Obama to be a one-remark president McConnell responded that Obama himself wanted to be a two-term president “so what’s unusual about that?” he asked.

“I don’t think we ought to be talking about what’s going to happen two years from now. He wants to be a two-term president; I want him to be a one-term president. The American people have put us both in charge for two more years and we need to have a relationship with each other and see what we can do working together.”

Commenting on another topic, the Wikileaks publication of U.S. diplomatic traffic, McConnell called Wikileaks founder Julian Assange “a high-tech terrorist. He has done enormous damage to our country. I think he needs to be prosecuted to the fullest extent of the law” and change the law to apply to Assange, if necessary.

Senate Democrats fall short on tax effort
But despite the furor over Wikileaks, the tax bargaining endgame remains the focus of congressional leaders as the lame-duck session heads toward Christmas.

On Saturday, McConnell joined with his Republican colleagues and with five Democratic senators to block a Democratic proposal supported by Obama to raise taxes on upper-income people while extending the current rates for single people earning less than $200,000 and for married couples earning less than $250,000.

The five Democrats joining with the Republicans were: Sens. Russ Feingold of Wisconsin, Jim Webb of Virginia, Ben Nelson of Nebraska, newly-elected Joe Manchin of West Virginia, and self-styled Independent Democrat Joe Lieberman of Connecticut.

Lieberman, Webb, Nelson and Manchin (elected to fill the unexpired term of Sen. Robert Byrd, who died last June) are all up for re-election in 2012. Feingold was defeated in last month's election.

Democrats needed 60 votes to move their bill ahead to a final vote; they got only 53.

In a separate vote, Sen. Charles Schumer, D-N.Y., lost his bid to have higher tax rates apply to those earning more than $1 million.

Obama’s negotiators are working with McConnell’s representative, Sen. Jon Kyl, R-Ariz., and with House Republicans to design a compromise that Congress can pass before the end of the year.

On CNN Sunday, Sen. Orrin Hatch, R-Utah, said he thought a two-year or three-year extension of the current tax rates seemed the most likely outcome, while another guest Sen. Ron Wyden D–Ore., said he would be willing to vote for a one-year extension of current rates.

But Hatch raised a potential snag in the effort to reach a bipartisan accord: the president and the Democrats, he complained, want to extend the Make Work Pay tax credit for individuals earning less than $75,000 and married couples earning less than $150,000.

The Make Work Pay tax break — which was part of last year’s stimulus bill —  has cost the Treasury about $145 billion in foregone revenues, according to the non-partisan staff of the congressional Joint Committee on Taxation.

"Since President Obama has become president, the bottom 40 percent of all wage earners do not pay (income) taxes,” Hatch said. “Now it’s up to 49 percent; then they went ahead with Make Work Pay and it’s moving it toward 60 percent."

Hatch implied that lower-middle-income earners should not be exempt from paying income taxes, partly for equity reasons and partly due to the revenue lost by not taxing them.

Revenue lost by extending current tax rates
According to an estimate by the nonpartisan Congressional Budget Office, extending the current tax rates over the next two years, while also revising the Alternative Minimum Tax so that it does not affect middle-income taxpayers, would result in a loss of about $500 billion in revenue for the federal government.

The federal government recorded a budget deficit of $1.3 trillion in fiscal year 2010, which ended in September.

The deficit amounted to nearly nine percent of Gross Domestic Product, the second-highest deficit as a share of GDP since 1945. In the current fiscal year, the CBO expects the deficit to be about seven percent of GDP.

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