There’s good news for American taxpayers and bad news for the President and Democrats. Today, the President announced a tentative deal with the Republicans in Congress to extend the Bush era tax cuts at all income levels for two years. In return, the President secured Republican approval to keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.

The tentative agreement highlights the chaos and strains that Mr. Obama faces in his own party as he plots a course between his desire to get things done and retreating on his own principles.

“It’s not perfect, but this compromise is an essential step on the road to recovery,” Mr. Obama said. “It will stop middle-class taxes from going up. It will spur our private sector to create millions of new jobs, and add momentum that our economy badly needs.”

The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing the nation’s long-term fiscal imbalances.

The tentative deal would include the:

• Reduction of the 6.2 percent Social Security payroll tax on all wage earners by two percentage points for one year
• Continuation of a college-tuition tax credit for some families
• Expansion of the earned-income tax credit
• Provision to allow businesses to write off the cost of certain equipment purchases
• Top rate of 15 percent on capital gains and dividends would remain in place for two years
• Alternative minimum tax would be adjusted so that as many as 21 million households would not be hit by it
• Provision for a 13-month extension of jobless aid for the long-term unemployed

Perhaps the biggest concession by the President to the Republicans was on estate taxes. Mr. Obama agreed to a deal on the federal estate tax that allows an exemption of $5 million per person and a maximum rate of 35 percent. — a higher exemption and far lower rate than many Democrats wanted.

“The House Democrats have not signed off on any deal,” Representative Chris Van Hollen of Maryland, who has been representing House Democrats in formal negotiations on the tax issue, said Monday night. “We will thoroughly review and discuss the proposed package in the caucus.”

Some senior Democrats said an agreement by Mr. Obama to accede to Republican demands on the estate tax could lead to a revolt among lawmakers. Mr. Obama noted that he, too, still strongly disagreed with the Republican insistence on extending the tax breaks for the highest earners. “Ever since I started running for this office, I’ve said that we should only extend the tax cuts for the middle class,” he said, acknowledging that he had been thwarted in one of the chief goals of his presidency.

These major concessions by the President are substantial. They mark the beginning of a new trend – marked infighting between Obama and Democrats, increased compromise with Republicans on issues and less support by the American public.

And it’ll get worse. In January, the Republicans gain control of the House.

All politics aside, most Americans believe the extension of the Bush era tax cuts is essential to economy recovery - if just for the psychological lift it represents.

Source: nytimes.com

The Biden solution to the country’s economic woes is to extend unemployment benefits and extend the Bush tax cuts for the middle class.

The Vice President tied the two together after the latest unemployment figures were announced on Friday. Biden said the report was “disappointing”. The unemployment rate, at a seven month high, is at 9.8 percent.

“No question, the report is disappointing,” Biden told reporters before a meeting with Treasury Secretary Tim Geithner, budget director Jack Lew and economic aide Jared Bernstein.

Geithner and Lew have been negotiating with Republicans to reach a deal on extending the Bush-era tax cuts. Biden said the discussions are continuing but no conclusions have been found.

“The tax relief for the middle class is also critical for the economy and the right things to do for American families,” Biden said.

Congress also should act immediately to extend unemployment benefits to the millions who will lose them at the end of the year, Biden said.

Instead of spending billions to extend unemployment benefits, why not allocate those funds to a “national small business fund”. This fund could encourage and promote small business growth (and jobs) by providing grants and 0 (zero) interest loans to entrepreneurs and small businesses that meet specific guidelines.

Throwing money at unemployment doesn’t solve the main economic problem in America – lack of jobs!

source: politico.com

The Associated Press has reported that Senate Republican leader Mitch McConnell predicts the Senate will vote to extend Bush era tax rates to all taxpayers. The only issue to be negotiated with Democrats and the White House is for how long.Republicans are calling for a permanent extension to the Bush tax cuts of 2001 and 2003 for all taxpayers. President Obama, on the other hand, wants to extend the cuts to individuals making less than $200,000. A temporary extension of one to three years (for all taxpayers) would represent a compromise between both sides.

But the White House had signaled it could be amenable to a temporary extension while stressing its opposition to a permanent extension of the tax rate for wealthier taxpayers.

Even if both parties agree on a tax cut extension compromise, there may still be another bone of contention. Democrats want to include extending unemployment benefits as part of the tax agreement.

Considering the Republicans will greatly increase their power on Capitol Hill in January, chances are they will have little incentive to make concessions this year.

Source: associated press