Now, it's House's turn to vote on $858 billion tax cut plan

McClatchy NewspapersDecember 15, 2010 

WASHINGTON — The Senate's 81-19 vote Wednesday to extend Bush-era tax cuts would dramatically increase already huge federal budget deficits, yet many of the same lawmakers who rail against deficits eagerly backed the tax breaks.

The legislation would cost the Treasury an estimated $858 billion over 10 years, according to the non-partisan Congressional Budget Office. Despite that, some prominent deficit hawks voted for it.

"I don't think that keeping the current tax rates raises deficit spending," said Sen. John Cornyn, R-Texas.

While $858 billion is "a bitter pill to swallow," said Sen. Bill Nelson, D-Fla., "I doubt that there is anybody in this chamber that wants the alternative."

The alternative: Unless the Bush-era tax rates are extended, tax rates will rise on Jan. 1 on all Americans, which could stifle the fragile economic recovery. In addition, the package extends benefits for an estimated 7 million jobless Americans for another 13 months.

The House of Representatives is expected to approve the package Thursday, but unease over the deficit is growing.

Last year's deficit was $1.29 trillion. The Congressional Budget Office estimates that without extending the tax cuts, the deficit will top $1 trillion this fiscal year. The tax cuts would add another $374.1 billion to this year's deficit, CBO estimates, and $422.9 billion next year.

Rep. Peter Welch, D-Vt., a leader of liberal opposition to the plan, blasted it as "fiscally irresponsible," saying his colleagues have "forgotten quickly" the 12-day-old recommendations from the bipartisan deficit commission, which urged tough steps to cut deficits by $4 trillion during the next 10 years.

On the right, Rep. Mike Pence, R-Ind., said he plans to vote no even though the jobless benefits are needed.

"Frankly," he said, "we can provide assistance to families struggling in this economy by making the hard choices to pay for it without adding to the national debt."

Cries from the conservative heartland help steel such conviction.

An online petition circulated by Tea Party Patriots, a conservative grassroots group, says the bill has triggered "an anger that will not diminish." Conservative radio talk show host Hugh Hewitt protests that the deal "spends billions and billions of dollars that the country does not have in order to prevent a tax hike that the country voted against."

The bill would extend all Bush-era tax rates for another two years. It also would extend jobless benefits for the long-term unemployed for 13 months; cut 2 percentage points from the Social Security payroll tax next year; and extend dozens of special interest tax breaks, notably for energy, business and education.

Most aggravating to liberals, it would impose a 35 percent tax on individual estates of more than $5 million. Many Democrats are pushing for a 45 percent rate on estates of more than $3.5 million.

Independent analysts have offered grudging praise for the package. They argue that while the deficit is a serious concern, the economy needs a short-term stimulus.

"In an ideal world, one would combine this boost with some sort of long-term retrenchment. But this isn't an ideal world," said Chuck Marr, the director of federal tax policy at the Center on Budget and Policy Priorities, a liberal research group.

A long-range deficit reduction plan is coming, lawmakers said.

Senate Budget Committee Chairman Kent Conrad, D-N.D., a deficit commission member, voted for its plan on Dec. 3 and voted for the tax cuts Wednesday. At the moment, he said, short-term stimulus is crucial. "All reputable economic analysis shows that this package is necessary to strengthen economic growth next year," he said.

That view's expected to prevail in the House, but many members have qualms.

Rep. Elijah Cummings, D-Md., who's considering voting no, said that Republicans will use the huge deficit to "justify cutting social programs." While he likes the idea of extending tax cuts for the poor and middle class, "the middle class in the end will pay big time for a loss of programs."

Rep. Jeff Flake, R-Ariz., said he's concerned about the ballooning deficit and questions how a one-year payroll tax cut would spur economic growth. (By giving workers more money to spend, advocates say.)

Meanwhile, the next fiscal fight in Congress has started. Government funding runs out Saturday night unless Congress acts, and Democrats are pushing a spending plan for the rest of fiscal 2011, which ends on Sept. 30, that Republicans say is too expensive.

"I think this is an outrage,'' Cornyn said.

The plan contains about 6,600 earmarks totaling about $8 billion, special local projects inserted by lawmakers, including some that Cornyn wanted. Republicans have vowed to end the practice — though some have earmarks in the bill.

Don't worry, Cornyn said. "We will reject any earmarks requested by us or anyone else," he said, "because that's what the American people told us they want."

ON THE WEB:

Senate roll call on tax cut

White House-Republican tax cut deal

Congressional Budget Office estimate of deal's cost

CBO deficit estimates

Tea Party Patriots website

MORE FROM MCCLATCHY:

Tax breaks for special interests sweeten tax cut deal

Senate approves tax cut plan by 81-19 vote

Tax-cut deal could be good for economy — with a big 'if'

Likely Obama victory on tax cuts leaves Democrats unhappy

For more McClatchy politics coverage visit Planet Washington

McClatchy Newspapers 2010

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