UPDATE 4-U.S. Republicans, Democrats seal rare deal on taxes

Wed Feb 15, 2012 6:24pm EST

Related Topics

* Republicans hope to move to main mission: attacking Obama

* Democrats bask in rare victory

* House and Senate expected to vote by Friday

By Richard Cowan and Thomas Ferraro

WASHINGTON, Feb 15 (Reuters) - U.S. 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 Nov. 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.

"MAJOR TURNING POINT"

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.

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Comments (4)
MeritMan wrote:
This does not solve anything for anyone. Temporary tax credits do not stimulate the economy or create jobs. I am happy that Democrats see this as a win. It fits with the whole “WINNING” mantra that was made famous by another famous Democrat Charlie Sheen…

Feb 15, 2012 5:52pm EST  --  Report as abuse
babyowl wrote:
If the republicans spent as much time on getting our economy back on track as they insist on attacking Obama and every other democratic president, this country would never be in the “red”.

Talk about poor losers….these attacks on presidents by the republicans should be seriously considered acts of terrorism against this country.

Feb 15, 2012 6:58pm EST  --  Report as abuse
DemonDemon wrote:
Yeah, basically they caved because the elections are coming up and they want the indies to vote for them so want to appear like they represent the common man. Once they have your vote, they’ll get back to screwing the middle class like they have for the last 30 years. Don’t be a sap.

Feb 15, 2012 7:07pm EST  --  Report as abuse
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