Republicans, Democrats seal rare deal on taxes

WASHINGTON Wed Feb 15, 2012 6:25pm EST

House Speaker John Boehner on Capitol Hill, December 23, 2011. REUTERS/Yuri Gripas

House Speaker John Boehner on Capitol Hill, December 23, 2011.

Credit: Reuters/Yuri Gripas

Related Video

Related Topics

WASHINGTON (Reuters) - Lawmakers on Wednesday reached a sweeping tax cut deal that provides a victory to Democrats and frees Republicans of an issue that threatened to stalk them to the November elections.

"The deal is done," a top Republican aide said after the main negotiators from both parties worked out their remaining differences. A senior Democratic aide said the top negotiators had finished their work.

The negotiated accord still awaits formal approval, possibly later in the day, by a special bipartisan committee composed of members of the Senate and House of Representatives.

The two chambers are expected to approve the deal by Friday, before lawmakers leave for a week-long recess.

The agreement would extend the payroll tax cut, first implemented in 2011 at the request of President Barack Obama, until the end of this year for about 160 million U.S. workers.

Passage would end a battle that has raged since last year over legislation that some economists say is vital to keeping the U.S. recovery on track by injecting up to $130 billion into the economy through consumer spending.

With the 2012 presidential and congressional campaigns heating up in the run-up to the November 6 elections, Republicans badly wanted to bury an issue that has left them divided and at risk of angering voters if they continued to be perceived as trying to kill the payroll tax cut.

"We're determined to put this to an end," first-term Republican Representative Renee Ellmers told reporters. One of 20 negotiators on the payroll tax cut legislation, Ellmers said Republicans now want to "move on to the real issues: the president's failed policies."

Congressional Democrats seized the moment to bask in a victory they hope will boost Obama's November re-election chances just as an improving economy is helping his poll numbers. Democratic aides described House Republican leaders' new willingness to let the payroll tax cut be extended and to do so without offsetting spending cuts by saying they had "caved" and "folded."

Long known as the party of low taxes, Republicans initially fought the payroll tax cut that largely helped low- and middle-income workers, saying temporary tax cuts did little to stimulate the economy.


But with economists disagreeing and Democrats simultaneously forcing Republicans to go on record in favor of tax cuts for the wealthy, Republicans found themselves in a losing situation.

As their leaders tried to move into winning territory, it only stoked Republican infighting as conservatives, including Tea Party movement activists, resisted handing Democrats a victory.

Greg Valliere of Potomac Research Group, a private group that tracks Washington for investors, called the tax deal which also extends unemployment benefits "a major turning point" for the U.S. economy.

"It greatly increases the odds that the economy will continue to expand," which should give a boost to Obama's reelection chances, Valliere told clients.

In addition, Valliere said, it drags House Republicans, who include many aligned with what has been seen as a rigid Tea Party movement, "into the world of compromise."

As evidence, Representative Joe Walsh, a Tea Party activist, has embraced the tentative deal, even though it would add about $100 billion to U.S. budget deficits - something that normally would be anathema to the Tea Party.

Analysts said that opinion polls showing public disgust with a gridlocked Congress may have helped drive lawmakers, many of whom are up for re-election this year, toward a deal.

"A lot of people in Washington, D.C., know that Congress is not enjoying such a great reputation and here's an opportunity to reach agreement to show that we can get our work done," said Democratic Senator Max Baucus, one of the negotiators.

(Additional reporting by Donna Smith and David Lawder; Editing by Cynthia Osterman)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (14)
Sensibility wrote:
“The agreement … would allow both Democrats and Republicans to declare victory. The maximum number of weeks to collect unemployment benefits, currently at 99, would gradually fall to 73 by year’s end, according to congressional aides.”

You couldn’t have gotten this done last year? Why is compromise a dirty word. Why can’t you do your jobs like the rest of us do, day in and day out.

At least for the moment it seems love is in the air. Happy Valentine’s Day, Washington.

Feb 14, 2012 10:22pm EST  --  Report as abuse
wildbiker wrote:
Does it seem like the Democrats are schizophrenics on steroids to anyone else? President Obama presents a new budget with fanfare, saying new taxes are the way back to prosperity. He trumpets the falling unemployment rate as a chief indicator the economy is coming back. Now the Congressional Democrats say longer-term unemployment benefits are still needed and tax cuts are a good thing. Strangely, both Democratic agendas grow the deficit!

Feb 15, 2012 9:01am EST  --  Report as abuse
GA_Chris wrote:
Partisan positions are unpatriotic. Anyone who puts party before country belongs in a totalitarian country or on trial for treason

Feb 15, 2012 10:13am EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.