WASHINGTON — The Obama administration said Thursday that it wanted an extension of unemployment assistance and a variety of tax breaks for low-wage and middle-income workers as part of a deal with congressional Republicans to extend all the Bush-era tax cuts.
But it is unclear how much leverage the White House has in the tax negotiations, given the drubbing Democrats took in the midterm elections, the tight congressional calendar and a threat by Senate Republicans to block any other legislation until the tax fight is resolved.
In a symbolic nod to President Barack Obama’s pledge to let the tax cuts on upper-income brackets expire on Dec. 31, as scheduled by law, the House Thursday approved a bill to continue the lower tax rates enacted during the Bush administration for Americans they described as “middle class.”
The bill, however, has no chance of passage in the Senate, where even some Democrats say the tax cuts should be extended for everyone, at least temporarily, given the continued weakness in the economy.
Senate Democratic leaders said they were preparing for their own series of symbolic votes on Friday, intended to demonstrate their own desire to end the tax cuts for the rich.
Republicans, meanwhile, expressed dismay at the posturing by Democrats, which they said was delaying the inevitable and even getting in the way of a potential deal on jobless aid for millions of unemployed Americans whose benefits have started to run out.
Administration officials said no deal was at hand, and negotiators from the administration and the two parties in Congress met only briefly on Thursday. It remained possible the two parties could be unable to reach a compromise, in which case tax rates would revert at the end of this year back to their pre-2001 levels, meaning an across the board tax increase. However, the Treasury could be directed to keep the current rates while negotiations continue.
But the sense within both parties was that Democrats were essentially negotiating the terms of their major retreat on an issue they once considered a slam dunk on both substantive and political levels.
Senior Senate Republican aides said an extension of all the income tax cuts was a foregone conclusion, but that a deal on jobless aid was possible if Democrats agreed to cover the cost. Democrats expressed indignation that Republicans were insisting on finding offsetting spending cuts to pay for unemployment benefits while being perfectly willing to add to the national debt the $700 billion cost of continuing the tax cuts for the highest incomes for the next decade.
“This is so grossly unfair,” the House speaker, Nancy Pelosi, said in a floor speech urging passage of the so-called middle class tax package.
While the House bill has no chance of becoming law, it held enormous symbolism for Democrats, who used the debate to accuse Republicans of standing for the rich.