Clinton supports the tax deal
December 13, 2010

The White House expressed confidence Sunday that President Barack Obama's deal with Republicans will pass by year's end, averting a Jan. 1 increase in income taxes for nearly all Americans, even the highest earners. In a sign of fading resistance, a Democratic leader said the lame-duck House will try to make changes, but won't block the bill.

Ahead of a test vote in the Senate on Monday, Obama adviser David Axelrod predicted the president's compromise deal would win out despite a tougher sell in the House. Majority Democrats, who lose control of the House to Republicans in January, voted last week not to allow it to reach the floor without changes to scale back relief for wealthy estates.

The package also would renew a program of jobless benefits for the long-term unemployed that is due to lapse within days and put in place a one-year cut in Social Security taxes.

"We believe that when it comes back to the House, that we will get a vote, and that we'll prevail there, because at the end of the day, no one wants to see taxes go up on 150 million Americans" on New Year's Day, Axelrod said. "No one wants to see 2 million people lose their unemployment insurance, and everybody understands what it would mean for the economy if we don't get this done."

Axelrod said he didn't foresee "major changes" in the House to the compromise.

Maryland Rep. Chris Van Hollen, a member of the Democratic leadership who represented the House in negotiations with the administration, made clear that Democrats strongly object to extending breaks to estates as large as $5 million. He said the package will be taken up in the House in some form, but there would be an effort to change the estate tax provision.

"We're not talking about blocking the whole thing," Van Hollen said, when asked if Democrats would essentially take a hard-line position on their views.

"The president made a deal with the Senate Republicans ... and to the credit of the Republicans, they did not say this better deal on the estate tax was essential," he said. "We're not going to hold this thing up at the end of the day, but we do think that simple question should be put to test. We're going to ask the Republicans and others, are they going to block this entire deal" to protect wealthy estates?

At the insistence of Republicans, the plan includes a more generous estate tax provision: The first $5 million of a couple's estate could pass to heirs without taxation, and an additional $5 million for the spouse. The balance would be subject to a 35 percent tax rate.

That provision infuriated Democrats who are already unhappy with Obama for agreeing to extend tax cuts at incomes of more than $200,000 for individuals and $250,000 for couples, and who say the tax breaks will unnecessarily add to the rising federal deficit. In all, the package would cost about $855 billion, according to a preliminary congressional estimate.

The No. 2 Senate Democrat, Dick Durbin of Illinois, said there was a "good cross-section" of fellow Democratic senators who are ready to accept the deal. He said House Democrats should go along because they won't be in as strong a position to fight for a better deal in 2011.

Rep. Paul Ryan, R-Wis., who will lead the House Budget Committee in the new Congress, indicated the tax relief package in its current form was "take it or leave it." He said if Democrats try to scuttle the deal on tax breaks, then the first thing Republicans will do when they take over the House next year is pass the package.

"We already have this deal with the president," Ryan said in explaining why House Republicans will not compromise.

Axelrod spoke on ABC's "This Week," "Face the Nation" on CBS and CNN's "State of the Union." Van Hollen and Ryan appeared on "Fox News Sunday" and Durbin was on CNN.

President Obama had invited former president Bill Clinton to the White House for a private talk, the details of which neither man chose to describe. But their public appearance will be long remembered. The sight and sound of Clinton going solo in the White House briefing room, as Obama slipped away to a holiday party, was certainly a head-turner on a slow Friday afternoon.

After brief remarks by Obama, Clinton slid behind the lectern as if he'd never left the building. For a time it looked like he might never leave, as he fielded questions from a White House press corps eager to keep him as long as it could. He stroked his chin. He folded his arms and looked pensive. He gesticulated expansively. He was part professor and full politician enjoying the spotlight.

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DADT on hold
December 10, 2010

The Senate on Thursday rejected a Democratic bid to open debate on repealing the "don't ask, don't tell" policy banning openly gay and lesbian soldiers from military service, possibly killing any chance for it to get passed in the current congressional session.

However, a bipartisan group of senators immediately said they would raise the issue again in a separate piece of legislation. It was unclear if the bid to separate the repeal provision from a larger defense authorization bill would increase its chances for approval.

Senate Majority Leader Harry Reid, D-Nevada, called Thursday's vote without an agreement with any Republican senators to support the motion, ensuring it would fail. The vote was 57-40 in favor of the cloture motion that required 60 votes to pass.

A Republican filibuster forced Democrats to seek a deal that would get them the necessary GOP support to get the 60 votes to proceed. The Democratic caucus has 58 members, meaning they needed at least two Republicans to join them to overcome the filibuster.

Reid had been negotiating with moderate Republican Sen. Susan Collins of Maine for her support, and he postponed a planned vote Wednesday to allow more time for the talks to reach agreement.

However, Reid announced Thursday he was calling the vote to open debate on the defense authorization bill, saying it was time to act on it after months of Republican obstruction and intransigence.

Collins, apparently caught by surprise, missed the start of Reid's speech and requested a chance to question him on the Senate floor. She reiterated her support for repealing "don't ask, don't tell" and asked if the deal she had been discussing with Reid on Wednesday still stood.

Reid indicated he would honor parameters of the deal, which would allow Republicans to offer up to 10 amendments along with ample time for debate, but he refused to make an outright commitment. He blamed Republican leaders for the situation and praised Collins for being the only GOP senator he could even speak to about a possible deal for her support.

In response, Collins said, "I am perplexed and frustrated that this important bill is going to become a victim of politics. We should be able to do better."

The vote then proceeded, with Collins joining Democrats in voting to open debate while one Democrat, newly elected Sen. Joe Manchin of West Virginia, voted with the filibustering Republicans. Manchin's opposing vote killed any chance for the Democrats to succeed.

President Barack Obama said in a statement that he was "extremely disappointed that yet another filibuster has prevented the Senate from moving forward" with the defense authorization measure that includes the repeal provision.

Noting support for repeal from the defense secretary, the Joint Chiefs of Staff chairman and a majority of Americans, Obama said the "don't ask, don't tell" policy "weakens our national security, diminishes our military readiness, and violates fundamental American principles of fairness, integrity and equality," Obama's statement said.

"While today's vote was disappointing, it must not be the end of our efforts," Obama said. "I urge the Senate to revisit these important issues during the lame-duck session."

Gay rights advocacy groups, including those comprising military personnel, immediately condemned the Senate vote.

"Today leaders of both parties let down the U.S. military and the American people," said Joe Solmonese, president of the Human Rights Campaign. "Instead of doing what is right, 'the world's greatest deliberative body' devolved into shameful schoolyard spats that put petty partisan politics above the needs of our women and men in uniform."

Solmonese added. "This fight is too important to give up despite this setback and we will continue fighting in this lame-duck session. It's not over."

Sen. Joe Lieberman, an independent from Connecticut who caucuses with the Democrats, later said he believed that up to four Republican senators -- Collins, Scott Brown of Massachusetts, Lisa Murkowski of Alaska, and Richard Lugar of Indiana -- might support a separate repeal proposal that he will introduce with Collins and Sen. Mark Udall, D-Colorado.

Before Thursday's vote, Reid complained that all 42 of the GOP senators have pledged to block action on any measure before the chamber deals with extending Bush-era tax cuts and authorizing government spending for the rest of the fiscal year.

The Democratic strategy appeared to be to try to persuade Collins to vote for opening debate on the measure so that the two other Republicans who also have expressed support for a repeal -- Brown and Murkowski -- also might do so. Murkowski announced her support for a repeal in a statement Wednesday.

Democrats were pushing for action now because the new Congress in January brings a Republican-controlled House and a diminished Democratic majority in the Senate, which will make repealing "don't ask, don't tell" more difficult.

Collins said Wednesday she had asked Reid to delay the vote until after the Senate completes work on the package of tax measures negotiated by the White House and congressional leaders, which Republicans consider a top priority in the final weeks of the lame-duck session that ends in early January.

She also wanted Reid to schedule sufficient time to debate the defense authorization bill that contains the "don't ask, don't tell" repeal measure.

Both Reid and Collins, in their comments on the Senate floor Thursday, acknowledged an agreement for the debate to include up to 15 amendments -- 10 by Republicans and five by Democrats. However, Reid appeared to oppose the request to wait until the tax package had been passed.

Obama has been calling senators in both parties to urge their support, White House Press Secretary Robert Gibbs said. Before Thursday's vote, Gibbs told reporters that congressional repeal of "don't ask, don't tell" was the best way forward, and he believed it could happen before the end of the year.

Obama has called for repealing "don't ask, don't tell" after years of debate on the policy that detractors consider discriminatory. More than 400 military personnel were discharged under the policy in 2009, and a federal judge ruled it unconstitutional in a case that is under appeal.

Defense Secretary Robert Gates and Joint Chiefs of Staff Chairman Adm. Mike Mullen both have urged Congress to vote for a repeal. The measure before the Senate, which has already gained approval in the House, contains a process for implementing the change that requires certification from the president, the defense secretary and the Joint Chiefs chairman.

Gates has warned that court challenges to "don't ask, don't tell" could force an immediate repeal of the policy, rather than the process in the legislation that would allow the military to manage the change on a longer timetable.

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Dems reject tax deal
December 10, 2010

House Democrats voted Thursday against considering the tax package that President Barack Obama negotiated with Republicans, raising questions over the president's influence in his own party.

Later, Senate Majority Leader Harry Reid, D-Nevada, released the first version of legislation to implement the negotiated deal and said the Senate would vote Monday to open debate on it. The Senate version made public by Reid was largely the same as the deal announced by Obama, but it added extensions of some tax breaks intended to spur green energy investment, such as ethanol use.

However, the vote by the House Democratic caucus was a defiant rejection of both the agreement on tax and benefit measures, as well as what many Democrats in the chamber perceived as being marginalized in the talks by the White House.

"This message today is very simple. That in the form that it was negotiated, it is not acceptable to the House Democratic caucus," said Democratic Rep. Chris Van Hollen of Maryland, who represented House Democrats in the negotiations. "It's as simple as that."

Van Hollen pledged to "work with the White House and our Republican colleagues to try and make sure we do something right for the economy and right for jobs."

The caucus members chanted "Just say no," according to two Democrats who attended the meeting. Rep. Laura Richardson of California later asked reporters outside the room: "Did you hear us saying 'Just say no'?"

The negotiated package includes a two-year extension of Bush-era tax cuts set to expire at the end of the year, as well as 13 months of unemployment benefits and a cut of two percentage points in the payroll tax. In addition, the plan extends current tax breaks for students and lower-income Americans, and adjusts the estate tax in a way that Democrats believe benefits the wealthy.

Republicans generally appear supportive of the package, which White House advisers noted gave them their two main priorities -- an extension of the lower tax rates from the Bush era to everyone, including the wealthiest Americans, and setting a lower-than-expected estate tax rate only on inheritances of more than $5 million.

Both provisions angered liberal Democrats, who oppose extending the lower tax rates enacted in 2001 and 2003 to the wealthy. Some said Obama should have forced a showdown with Republicans over the tax cut extensions by holding out longer to force more GOP concessions.

However, Obama and White House aides said the deal reached in negotiations was the best they would get from unyielding Republicans, who will take control of the House and enjoy a stronger minority stake in the Senate when the next session of Congress begins in early January.

White House Press Secretary Robert Gibbs told reporters that he expected Congress to pass a package this year because the alternative was higher taxes for everyone after December 31.

"At the end of the day, members are not going to want to be in their districts, senators are not going to want to be in their districts, when their constituents find out their taxes have gone up by several thousands of dollars," Gibbs said, noting that the deal is a compromise with elements unpalatable to both sides. "If everybody took out what they didn't like, we'd have nothing. And we know the consequences of doing nothing."

Earlier, the White House responded to the House Democrats' move by saying it remains confident "that the major components" of the tax compromise will pass, according to White House spokeswoman Jen Psaki.

A top Democratic adviser to the White House added that Senate Democrats "have several vehicles they can use" as the legislative base for the tax plan, and are working on a plan to pass a tax bill and "then jam the House" with that legislation.

While the House Democrats' vote is nonbinding, Texas Rep. Lloyd Doggett -- who said the resolution was adopted by a "very loud voice vote" -- had "no doubt" that House Speaker Nancy Pelosi would follow the caucus vote against the bill.

Pelosi said discussions with Obama and Democratic and Republican lawmakers will continue to improve the proposal before it comes to the House floor for a vote.

"Democratic priorities remain clear: to provide a tax cut for working families, to create jobs and economic growth, to assist millions of our fellow Americans who have lost their jobs through no fault of their own, and to do this in a fiscally sound way," Pelosi said in a statement.

The Obama administration earlier described the negotiated package as non-negotiable, and Thursday's rejection of it by House Democrats indicated the president has little room to renegotiate with Republican leaders for a bill more palatable to members of his party.

Senate Democratic leaders havesaid they would push for changes in the package, and a senior Senate Democratic aide said Thursday that the changes Senate Democrats will make are "minor," adding some clean energy tax provisions and other proposals that would fall short of what House Democrats want.

When asked about those differences, the senior Democratic aide said: "For years, the House sent us one bill after another they ... know they can't get out of the Senate. The only thing we are focused on here is getting this tax cut bill out the Senate. The House is on their own."

Rep. James Clyburn of South Carolina, the No. 3 Democrat in the House, said Thursday that the estate tax provision remained a problem for his caucus.

The estate tax, which expired this year, is scheduled to be reinstated at a higher rate of 55 percent next year, with an exemption up to $1 million. A bill that passed in the House a year ago set the threshold for the exemption at $3.5 million and the tax rate at 45 percent, while the provision in the tax deal exempts estates up to $5 million and sets a lower rate at 35 percent.

However, Rep. Shelley Berkley of Nevada said she would support the tax package as a compromise made under tough circumstances.

"If it passes the Senate and this is the compromise the president of the United States has committed to, what are we going do in the House, hold this up?" Berkley said.

Thursday's vote by House Democrats came a day after Vice President Joe Biden warned them against insisting on changes, fearing further delays could unravel negotiations with Republican counterparts.

Top White House aides defended the tax plan Wednesday, saying Democrats had been coming around to the reality that the agreement contains plenty of good things despite proposals they dislike.

At the same time, senior White House economic adviser Larry Summers warned Congress that failing to approve the agreement could "increase the risk that the economy would stall out and we would have a double dip."

Summers stressed that he was not predicting an actual double-dip recession, which is defined as a recession followed by a short-lived recovery and then another recession, but added the possibility would increase greatly without approval of the tax plan by the end of the year.

House Democrats continued to criticize the agreement negotiated with congressional Republicans as too expensive and giving away too much to their political opponents.

Rep. Anthony Weiner of New York told CNN on Thursday that the deal "didn't reflect the best we could get, and it does not reflect Democratic values and frankly, does not even reflect where the American people are."

Asked if Obama sold out Democrats, Weiner replied: "I don't think he sold us out. I just don't think he made a very good deal."

On the Senate side, Democrats showed more openness to the agreement, though party leaders in the chamber said they would seek changes to improve the deal.

"We're working those out with the administration," said Sen. Dick Durbin of Illinois, the Senate's second-ranking Democrat. Asked whether the changes could undermine Republican support, Durbin said, "Well, of course, but we have to try to have a process [in which] senators can express themselves."

On Wednesday, Obama downplayed tensions among Democrats and told reporters he expects the deal will pass in the end.

"I think it is inaccurate to characterize Democrats at large as feeling, quote unquote, betrayed," Obama said. "I think Democrats are looking at this bill and you've already had a whole bunch of them who've said this makes sense, and I think the more they look at it, the more of them are going to say this makes sense."

Obama, and later Summers, noted that economists were predicting the package of tax breaks and benefits would boost the economy in the next two years, particularly in a period of sluggish recovery from recession and unemployment at almost 10 percent.

Summers warned that failure to pass the bill now could reverse such positive predictions from analysts including Mark Zandi of Moody's Analytics.

Echoing the views of other analysts at Goldman Sachs and elsewhere, Zandi now says that real Gross Domestic Product growth in 2011 "will accelerate to 4 percent, job gains will pick up to 2.8 million, and the unemployment rate will decline to around 8.5 percent by year's end."

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Dream or nightmare?
December 10, 2010

Senate Democrats conceded Thursday they don't have the votes to pass the DREAM Act, a bill that would have offered a path to citizenship for some illegal immigrants who entered the United States as children.

Democrats voted to pull the measure from consideration, a move that jeopardizes the chances for passing the hotly contested bill during the current lame-duck session of Congress that ends in early January.

While supporters say the measure that passed the House on Wednesday could still come up, each passing day reduces the likelihood for introducing and debating the act as legislative leaders battle over priorities in the waning days of the session.

Senate Republicans opposed the bill, standing by their pledge to block any legislation during the lame-duck session until the chamber approves bills to extend the Bush tax cuts and fund the government.

The so-called Development, Relief and Education for Alien Minors Act would have affected immigrants who entered the United States illegally as children under the age of 16 and have lived in the country for at least five years. Other requirements include graduating from high-school or obtaining a General Education Development diploma and demonstrating "good moral character."

Even then, only a six-year conditional status would be awarded. Before moving to the next phase, the students would need to meet additional requirements -- attending college or serving in the military for at least two years, and passing criminal background checks.

Proponents, including President Barack Obama and Democratic leaders, say the bill offers legal standing to young people brought to the United States who have bettered themselves and served their new country, while opponents claim it is a form of amnesty for illegal immigrants.

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Wiki supporters take on Visa
December 9, 2010

WikiLeaks supporters struck back today at perceived enemies of the site and its jailed founder Julian Assange, launching hack attacks against Mastercard, Swedish prosecutors, a Swedish defense lawyer and a Swiss group that froze Assange's bank account.

Internet hacktivists operating under the label 'Operation Payback" claimed responsibility in a Twitter message for causing technological problems at MasterCard, which pulled the plug on its relationship with WikiLeaks on Tuesday.

MasterCard said it was 'experiencing heavy traffic," but spokesman James Issokson told The Associated Press the company would not confirm whether Wiki-Leaks was involved. Issokson said MasterCard was trying to restore service today but was not sure how long that would take. The website's technical problems have no impact on consumers using credit cards for secure transactions, he added.

MasterCard is the latest in a string of U.S.-based Internet companies -- including Visa, Amazon.com, PayPal Inc. and EveryDNS -- to cut ties to WikiLeaks in recent days amid intense U.S. government pressure.

The online attacks are part of a wave of support for WikiLeaks that is sweeping the Internet. Twitter was choked with messages of solidarity today for the group, while the site's Facebook page hit 1 million fans.

Offline, the organization is under pressure on many fronts. Assange, who turned himself in to London police on Tuesday, is now in a British prison fighting extradition to Sweden over a sex crimes case. Moves by Swiss Postfinance, Master-Card, PayPal and others, meanwhile, have impaired the secret-spilling group's ability to raise money.

The pro-WikiLeaks vengeance campaign appeared to be taking the form of denial of service attacks in which computers across the Internet are harnessed -- sometimes surreptitiously -- to jam target sites with mountains of requests for data, knocking them out of commission.

PayPal's vice president of platform, Osama Bedier, said the company froze WikiLeaks' account after receiving a letter from the U.S. State Department 'saying that the WikiLeaks activities were deemed illegal in the United States."

'It's honestly just pretty straightforward from our perspective," he said, speaking at a web conference in Paris. A video of his comments was posted today on the TechCrunch website.

Neither WikiLeaks nor Assange has been charged with any offense in the U.S., but the government is investigating whether Assange can be prosecuted for espionage or other offenses.

Per Hellqvist, a security specialist with the firm Symantec, said a loose network of web activists called Anonymous appeared to be behind many of the attacks. The group, which has previously focused on the Church of Scientology and the music industry, has promised to come to Assange's aid by knocking offline websites seen as hostile to WikiLeaks.

'While we don't have much of an affiliation with WikiLeaks, we fight for the same reasons," the group said in a statement on its website. 'We want transparency and we counter censorship. ... This is why we intend to utilize our resources to raise awareness, attack those against and support those who are helping lead our world to freedom and democracy."

The website for Swedish lawyer Claes Borgstrom, who represents the two women at the center of Assange's sex crimes case, was unreachable Wednesday.

The Swiss postal system's financial arm, Postfinance, which shut down Assange's new bank account on Monday, was also having trouble. Spokesman Alex Josty said the website buckled under a barrage of traffic Tuesday but the onslaught seems to have eased off.

'Yesterday it was very, very difficult, then things improved overnight," he told the AP. 'But it's still not entirely back to normal."

Ironically, microblogging site Twitter -- home of much WikiLeaks support -- could become the next target. Operation Payback posted an online statement claiming 'Twitter you're next for censoring Wikileaks discussion."

Some WikiLeaks supporters accuse Twitter of preventing the term 'WikiLeaks" from appearing as one of its popular 'trending topics." Twitter denies censorship, saying the topics are determined by an algorithm.

Meanhwhile, the French government's effort to stop a company there from hosting WikiLeaks has failed -- at least for now.

The Web services company OVH, which says a client has rented an OVH server that now hosts the wikileaks.ch website, sought a ruling by two courts about the legality of hosting WikiLeaks in France. The judges said they couldn't decide on the highly technical case right away.

WikiLeaks angered the U.S. government earlier this year when it posted a war video taken by Army helicopters showing troops gunning down two unarmed Reuters journalists. Since then, the organization has leaked some 400,000 classified U.S. war files from Iraq and 76,000 from Afghanistan that U.S. military officials say included names of U.S. informants and other information that could put people's lives at risk.

The latest leaks involve private U.S. diplomatic cables that included frank U.S. assessments of foreign nations and their leaders.

Those cables have had serious repercussions for the United States, embarrassing allies, angering rivals, and reopening old wounds across the world. State and Defense department officials say foreign powers have been pulling back from their dealings with the U.S. government since the documents hit the Internet.

Although U.S. officials have directed their ire at Assange, even American allies have begun to ask whether Washington shares some of the blame.

'The core of all this lies with the failure of the government of the United States to properly protect its own diplomatic communications," Australian Foreign Minister Kevin Rudd said Wednesday.

'To have several million people on their distribution list for a quarter of a million cables -- that's where the problem lies," Rudd added.

The latest batch of cables released Wednesday showed that the British government feared a furious Libyan reaction if the convicted Lockerbie bomber wasn't set free and expressed relief when they learned that he would be released in 2009 on compassionate grounds.

Meanwhile, Assange faces a new extradition hearing in London next week, in which his lawyers say they will reapply for bail. The 39-year-old Australian denies two women's allegations of sexual misconduct, which includes rape, molestation and unlawful coercion. He has not been charged with any crime in Sweden and is fighting his extradition there.

In a Twitter message Wednesday, WikiLeaks spokesman Kristinn Hrafnsson shrugged off all the challenges and noted that the site is mirrored in over 500 locations by supporters.

'The latest batch of cables were released and our media partners released their next batch of stories," Hrafnsson said. 'We will not be gagged, either by judicial action or corporate censorship ... WikiLeaks is still online."

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Dems take on Obama
December 9, 2010

President Barack Obama's plan to extend tax cuts for all Americans ran into trouble on Tuesday when his fellow Democrats questioned it and investors dumped U.S. Treasury bonds on fear that low taxes will dig a deeper hole in the budget deficit.

While analysts believe Congress will probably approve the deal, Obama faced a rift with many in his party who think he was too quick to compromise with Republicans on taxes.

Democrats had sought tax reductions only for the lower and middle class and their support for the deal remained unclear before they hand over control of the House of Representatives to Republicans next month.

Obama said the deal would give a much-needed boost to the economy, which is still struggling to recover from the deepest recession in 70 years.

"This package will help strengthen the recovery. That I'm confident about," he told a news conference.

Economists reckon the compromise tax plan should eliminate uncertainty on tax policy, help reduce unemployment and raise economic growth in 2011.

The deal calls for a 13-month extension of unemployment benefits, which could placate Democrats. But Obama also conceded to Republican demands on the estate tax by proposing a 35 percent tax with a $5 million individual exemption level.

The Obama plan would cost $501 billion in lost tax revenues, according to the non-partisan Congressional Budget Office, at a time when voters are increasingly concerned about budget deficits that have approached 10 percent of economic output in recent years. A Senate Republican aide estimated the tax cuts will cost $700 billion.

House Speaker Nancy Pelosi emerged from an evening meeting with fellow Democrats telling reporters that there was "unease" in her party with aspects of the tax-cut plan.

That was evident from Representative Sander Levin, who chairs the tax-writing House Ways and Means Committee. "We expressed very serious concerns" about estate tax breaks in the plan that were won by Republicans.

BOND MARKET FEARS

Initial relief waned fast in financial markets, triggering a steep sell-off in U.S. Treasuries on spreading concern that the tax deal worsens the U.S. deficit and will stoke inflation.

Demand was weak at the three-year note auction, and the 10-year Treasury note suffered its worst sell-off since June 2009. Its yield jumped to 3.13 percent, up from 2.93 percent on Monday, which will ricochet through the economy by pushing up mortgage rates.

U.S. and European stocks had earlier risen on the deal.

Moody's Investors Service said U.S. finances could suffer in the long run.

"This reduces revenue on top of extending jobless benefits, which is bad for deficits. In the short run this is good news, but two to three years down the road foreign buyers of U.S. Treasuries may start to balk," said David Carter, chief investment officer at Lenox Advisors in New York.

Taxes would go up for almost all Americans if no extension is approved. Analysts predicted the tax-cut measure would ultimately become law as enough Republicans would back the deal to offset the Democrats who oppose it.

Obama leveled some of his toughest criticism to date at the left wing of the Democratic Party, saying his critics were taking a "sanctimonious" position.

His voice rose and he sounded exasperated when he told a news conference that if he had refused to compromise with the Republicans then, "People will have the satisfaction of having a purist position and no victories for the American people."

House Speaker Nancy Pelosi said Democrats would "continue discussions" on the deal in coming days. Representative Steny Hoyer, the No. 2 House Democrat, said he had not yet decided whether to back it. No date has been set for a vote.

The White House said the deal would achieve Democrats' priority by preventing a tax increase for working families that would average $3,000. It would also help those struggling in the wake of the worst recession since the 1930s by extending unemployment benefits and other tax cuts focused on those with more modest incomes, it said.

Economists say the plan could raise economic growth by 0.5 percent to 1.0 percent next year and lower unemployment.

"In all likelihood, the recovery would have made it through next year without backtracking into recession, but this deal improves those odds significantly," said Mark Zandi, chief economist at Moody's Analytics.

The deal would create 2.2 million jobs, according to the liberal Center For American Progress, giving a much-needed boost at a time when Congress has been unable to pass spending-based fiscal stimulus measures.

Federal Reserve Chairman Ben Bernanke has called for additional fiscal measures to supplement the central bank's $600 billion effort to spur demand by buying government bonds.

But many Democrats argued that Obama had given Republicans their top priority -- extending the tax breaks for the richest 2 percent of U.S. households -- without getting enough in return.

Some said Obama should have fought harder to set the tone for future negotiations with Republicans.

"By giving in this early I think we've just emboldened them," said Representative Raul Grijalva, a leader of the Progressive Caucus who said he would vote against the deal.

A Republican aide warned that his party would block the inclusion of Build America bonds, a taxable bond program popular with states, cities, and other municipal issuers.

Tax breaks for ethanol, clean technology, and employers who hire unemployed workers were also in the mix.

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Compromise or Cave?
December 8, 2010

President Barack Obama vigorously defended his agreement with Republicans to extend all of the Bush-era tax cuts on Tuesday, arguing that it was a price that had to be paid to spare the middle class from crippling tax hikes.

The president promised disheartened Democrats that the fight over the cuts for the highest-income Americans would continue over the next two years. He also urged them to take a long-term view of the bitter policy fights now taking place in Washington.

My "number one priority is to do what's right for the American people," he said at a hastily scheduled news conference at the White House. "Because of this agreement, middle class Americans won't see their taxes go up on January 1."

Obama blasted the Republicans for clinging to a rigid ideology that, in his opinion, has blinded the GOP to the needs and concerns of average Americans.

"I've said before that I felt that the middle class tax cuts were being held hostage to the high-end tax cuts," he said. "I think it's tempting not to negotiate with hostage takers, unless the hostage gets harmed. ... In this case, the hostage was the American people. And I was not willing to see them get harmed."

"If there was not collateral damage, if this was just a matter of my politics or being able to persuade the American people to my side, then I would just stick to my guns," he insisted. But "the issue is how do I persuade the Republicans in the Senate. ... I have not been able to budge them."

Extending tax cuts for the wealthy is the "holy grail" for Republicans, Obama said. It "seems to be their central economic doctrine," and, he noted, one they can defend by using the Senate filibuster.

Democrats need to "make sure we understand this is a long game, not a short one," he concluded, promising to take the fight to the GOP on the campaign trail in 2012.

It was not immediately clear if Obama's defense of the deal -- as well as Vice President Joe Biden's one-on-one efforts behind closed doors on Capitol Hill -- would sway more liberal Democrats. The overall cost to the U.S. treasury of the controversial compromise will be between $600 billion and $800 billion over two years, according to CNN estimates.

Biden will head to Capitol Hill again on Wednesday to meet with House Democrats, who indicated Tuesday that they have problems with the agreement.

House Speaker Nancy Pelosi said the reaction by her caucus to the deal "has not been too good," and Rep. Bill Pascrell of New Jersey said Obama made a mistake by agreeing so quickly with Republicans, adding that "if this is the playbook for the next two years, we want out because the Democrats in the House have obviously become irrelevant."

It was unclear, however, if the Democratic anger would become a revolt that could sink the agreement or bring attempts to change it in the final weeks of the current lame-duck session of Congress that ends in early January. Republicans say they won't accept any changes to the deal.

At the heart of the deal is an extension of the Bush-era tax cuts for two more years, which would keep income tax rates at their current levels for everyone, as Republicans have advocated. Obama and other Democrats had argued that tax rates should stay the same for most people but rise for people earning more than $200,000 a year and families making $250,000 or more a year.

The deal Obama and Republicans have struck also includes a one-year cut in payroll taxes, from 6.2% to 4.2%. The tax is applied to a worker's first $106,800 of wages. If implemented, it would mean that someone earning $50,000 a year would pay $1,000 less in Social Security contributions next year. Someone earning $100,000 would pay $2,000 less. The payroll tax rate would go back up to 6.2% in 2012.

The estate tax -- currently scheduled to return in 2011 to a top rate of 55% along with a $1 million exemption -- would instead come back with a lower top rate of 35% along with a $5 million exemption.

Agreeing to extend the Bush-era tax cuts for the wealthiest Americans represented a major concession for Obama. In a concession to Democrats, Republican negotiators agreed to leave in place for 13 months the option to file for extended federal unemployment benefits. That will not, however, affect how long someone can collect unemployment benefits -- the maximum will remain 99 weeks in states hardest hit by job loss.

The plan also would continue tax breaks for students and families contained in the 2009 stimulus bill and allow businesses to write off all investments they make next year.

Republicans appeared quick to rally behind the deal.

"The right thing for our country is to support the tax agreement," Tennessee GOP Sen. Lamar Alexander said before Obama spoke. "It makes it easier and cheaper to create private sector jobs."

Senate Minority Leader Mitch McConnell, R-Kentucky, predicted the "vast majority" of Senate Republicans will back the deal.

Several Democrats said they have reservations about the agreement. One key reason is the cost of extending benefits for wealthier Americans.

Extending the Bush-era tax cuts for two years would cost $458 billion, the Treasury Department has estimated -- $383 billion for lower and middle income Americans plus $75 billion for individuals making more than $200,000 a year and families making $250,000 or more. The White House has estimated that lowering the payroll tax would cost $120 billion. Extending unemployment benefits for 13 months comes with a $62 billion price tag, according to CNN estimates.

Lowering the top estate tax rate to 35% -- combined with the $5 million exemption -- costs $88 billion over two years, according to the Tax Policy Center.

The deal doesn't say anything about raising money to pay for the changes. That suggests that the federal deficit will continue to rise despite rising pressure to curb spending and lower the deficit. Just last week, a bipartisan presidential panel voted 11-8 in favor of spending cuts and tax changes that would cut $4 trillion from the projected deficits between now and 2020. That majority, however, was not big enough to send the proposal on to Congress.

The 2010 federal budget deficit was $1.3 trillion; it's projected to be somewhat smaller in 2011. That projection doesn't take the proposed tax deal into account.

Defenders of the deal contend that it is possible to be fiscally responsible while adding to the deficit in the short-term. The package, they argue, could help stimulate economic growth necessary to create new jobs and generate new tax revenue.

"One of the critical things for what our fiscal situation is going to be in 2014 and 2015 is not only the tougher policies that the president will talk about in his (upcoming) State of the Union (address), but ensuring that we get growth going in 2011 and 2012," a senior administration official said Monday.

If Congress doesn't pass some kind of tax deal by the end of the year, taxes will go up for everyone, since the current rates set under President George W. Bush expire automatically at the end of 2010. Democrats control both houses of Congress, but the Republicans will take control of the House of Representatives in January, and the Democratic majority in the Senate will be smaller than it is now.

Some Democrats, speaking to reporters before Obama's news conference, said the president had conceded too much to Republican demands.

"I still seem puzzled at the president's enthusiasm, and the Republicans giving an income tax break for people making over $1 million. We're borrowing $46 billion to do so," said Louisiana Sen. Mary Landrieu, a moderate Democrat.

Liberal Sen. Frank Lautenberg, D-New Jersey, accused the president of "capitulation under pressure."

"What do I think of it? Not much," said Sen. Patrick Leahy, D-Vermont.

Pelosi, D-California, said Tuesday the agreement "clearly presents the differences between Democrats and Republicans."

"Republicans have held the middle class hostage for provisions that benefit only the wealthiest 3%, do not create jobs, and add tens of billions of dollars to the deficit," she said. "We will continue discussions with the president and our caucus in the days ahead."

Maryland Rep. Chris Van Hollen, a member of the House Democratic leadership, said he has "serious reservations" about the deal, particularly as it relates to the estate tax.

House Majority Leader Steny Hoyer, D-Maryland, said he has not decided whether he'll ultimately vote for the proposal

Posted by jc at 2:18 AM - Link to this entry  |  Share this entry  |  Print

The Dream Act debate
December 8, 2010

Congress is expected to take up legislation this week that would give some people who are in the country illegally a path to citizenship. The DREAM Act is aimed at illegal immigrants brought here as children by their parents.

They would qualify for legal residency if they complete two years of college or two years of military service. But critics say it's still amnesty, and the bill faces long odds in the Senate.

Cesar Vargas, a third-year law student in New York, is one of some 2 million young people who would qualify for legal residency under the DREAM Act. He was brought to the U.S. from Mexico by his parents at age 5.

Vargas graduated from high school with honors and wants to join the armed forces - to give back, he says, to his country, the United States.

"I also plan to join the military and join the Marine Corps, either as a JAG officer in the Judge Advocate Corps or [as an] intelligence officer, so it's definitely giving back to my country. That's my core value, and that's what ... the DREAM Act will do," Vargas says.

'The Best And The Brightest'

To qualify, young people would have to have entered the country by age 16, pass a background check, graduate from high school, and attend college for two years or join the armed forces.

"These are the best and the brightest of the Latino immigrant community and other ethnic communities," says Frank Sharry, director of America's Voice, which favors the bill. "All they want to do is to live the American dream, so that they can contribute to a nation that they call home."

The measure has the support of Democratic congressional leaders, as well as the Obama administration. In a conference call with reporters last week, Homeland Security Secretary Janet Napolitano said her agency should spend its resources tracking down "criminal aliens" - threats to public safety and national security.

"What doesn't make as much sense is the idea of spending our enforcement resources to prosecute young people who have no criminal records, who were brought here through no fault of their own, so they have no individual culpability, and who now want to go to college or serve in our armed forces," she said.

A Priority For Democrats

Supporters of the DREAM Act are well-organized. They have been staging protests in congressional offices, holding candlelight vigils and running campaign-style ads.

One airing in Massachusetts targets Republican Sen. Scott Brown. "The military, small businesses and 66 percent of voters support the DREAM Act," it says. "Sen. Brown, where do you stand?"

But Brown is unconvinced. He's released a statement calling the DREAM Act a form of amnesty.

The measure is a political priority for Democrats. Senate Majority Leader Harry Reid promised to bring the DREAM Act up for a vote during his successful re-election campaign - in which support from Latinos played a key role.

"This is a last-ditch kind of political stunt," says Roy Beck, the director of NumbersUSA, which opposes the bill. "[House Speaker Nancy] Pelosi and Reid have made some promises to some groups; they've got everything all stirred up. They're going to cause an incredible amount of disappointment among a lot of students around the country on something that ... never had a chance."

'An Amnesty'

Opponents say the DREAM Act is likely to cost some $6 billion a year - a charge backers say doesn't add up - and that it will mean fewer jobs for U.S.-born workers.

"American people did not vote for an amnesty in this past election," says Republican Sen. Jeff Sessions of Alabama. "And it will be resisted with every strength and every ability that I have to do so. Because this is a lame-duck Congress, it will not pass next year, and it's not going to pass this year if I have anything to do about it."

And Sessions may well have his way. It appears unlikely the DREAM Act has enough votes in the Senate to win approval in the remaining days of this Congress.

Posted by jc at 2:17 AM - Link to this entry  |  Share this entry  |  Print

WikiLeaks is at it again
December 7, 2010

WikiLeaks founder Julian Assange is arranging to meet with British police, his lawyer has said, as the net tightened around the man behind the release of a hoard of secret US diplomatic cables.

Swedish authorities want to quiz the elusive 39-year-old Australian -- whose website is in the process of releasing tens of thousands of US cables -- on suspicion of crimes including rape.

Assange's lawyer, Mark Stephens, said British police had telephoned him to say they have received an extradition request from Sweden.

Stephens told AFP the meeting would be with British police and would take place in Britain -- although he refused to confirm widespread rumours that Assange was already in the country.

"The arrangements I have been making are for him to come and meet the British police," said Stephens, without giving a date for the interview.

The news came after a court in Stockholm issued an arrest warrant for Assange on November 18 for questioning on suspicion of "rape, sexual molestation and unlawful coercion" in Sweden in August.

Assange has denied the charges and Stephens said Sunday that the pursuit of his client had "political motivations".

Earlier Monday, Swiss authorities shut down one of Assange's bank accounts with the Swiss Post Office's banking arm saying he had provided false information in his application.

"PostFinance has ended its business relationship with WikiLeaks founder Julian Paul Assange," the bank said in a statement.

WikiLeaks had advertised the PostFinance account details online to "donate directly to the Julian Assange and other WikiLeaks Staff Defence Fund," giving an account name of "Assange Julian Paul, Geneve."

Meanwhile, a French judge declined to force web provider OVH to shut down the WikiLeaks site, after the government called for it to be kicked out of France.

"OVH is neither for nor against this site... We neither asked to host this site nor not to host it. Now that it's with us, we will fulfil the contract. That's our job," OVH's managing director Octave Klaba said.

French Industry Minister Eric Besson demanded WikiLeaks be banned from French servers after the site took refuge there on Thursday, after being expelled from the United States.

In one of its most explosive leaks of US secrets so far, WikiLeaks on Monday divulged a list of key infrastructure sites around the world that, if attacked by terrorists, could critically harm US security.

The website released a State Department cable from February 2009 asking US missions to update a list of infrastructure and key resources whose loss "could critically impact" the country's public health, economic life and national security.

The list detailed undersea cables, key communications, ports, mineral resources and firms of strategic importance in countries ranging from Britain to New Zealand, via Africa, the Middle East and China.

Also listed were European manufacturers of vaccines for smallpox and rabies, an Italian maker of treatment for snake-bite venom, and a German company making treatment for plutonium poisoning.

US Secretary of State Hillary Clinton said Monday she regretted the latest release.

"I will underscore that this theft of US government information and its publication without regard for the consequences is deeply distressing," Clinton told reporters.

"The illegal publication of classified information poses real concerns and even potential damage to our friends and partners" worldwide, she warned.

Meanwhile, US Attorney General Eric Holder said the latest WikiLeaks were "arrogant, misguided" and had put US national security and the lives of many at risk, adding that US authorities were pursuing a "very serious, active, ongoing investigation that is criminal in nature," into the leaks."

The latest release added to the political storm engulfing WikiLeaks and Assange, with the website already battling to secure avenues for financial donations, and left to hop-scotch across servers to evade a total shutdown.

Among its latest revelations:

-- the US has faced an uphill battle in trying to prevent arms from reaching the likes of Iran, Syria and North Korea. In one cable, Syrian President Bashar al-Assad is reprimanded for supplying sophisticated weapons to the Shiite militant group Hezbollah one week after providing assurances he would not;

-- European Union President Herman Van Rompuy told a US ambassador that Europe no longer believed in Afghanistan and that 2010 may be the last chance for success;

-- France and the United States have been cooperating more closely for a year in the fight against an Al-Qaeda unit in north Africa.

Posted by jc at 3:50 AM - Link to this entry  |  Share this entry  |  Print

Let's make a Tax Cut Deal!
December 7, 2010

President Barack Obama on Monday announced a deal with Republican leaders that would extend Bush-era tax cuts for two years and unemployment benefits for 13 months while also lowering the payroll tax by two percentage points for a year.

The compromise, worked out in negotiations involving the White House, the Treasury and congressional leaders from both parties, includes provisions that each side doesn't like, Obama said in a hastily arranged statement to reporters after discussing the proposed deal with Democratic leaders.

"It's not perfect," Obama said of the plan, which also would continue tax breaks for students and families contained in the 2009 stimulus bill and allow businesses to write off all investments they make next year. "We cannot play politics at a time when the American people are looking for us to solve problems."

As outlined by Obama and sources, the deal would add up to hundreds of billions of dollars in more federal spending or lower revenue in coming years at a time when the president, Republican leaders and a federal deficit commission appointed by the president all say that the growing federal debt must be brought under control.

Democrats in Congress expressed initial concern with the deal, saying it conceded too much to Republican demands.

"I'm not at all happy with this. I want to see all the details before I make some kind of commitment," Democratic Sen. Sherrod Brown of Ohio told CNN. Asked if Obama "caved" to Republicans, Brown said: "I don't know if he caved. I think he could have gotten a better agreement."

Vice President Joe Biden will attend the weekly Senate Democratic policy lunch Tuesday in the Capitol to "defend the deal," according to a Senate Democratic leadership aide
A revolt by liberal Democrats, particularly in the House, would imperil the chances for the plan to win approval before the end of current lame-duck session of Congress. With the Bush-era tax cuts set to expire at the end of the year, Obama said it was more important to act now than to continue waging a political fight.

"I know there are some people in my own party and in the other party who are willing to let this fight continue," Obama said. "I'm not willing to let us slip backwards just as we're recovering form this devastating recession."

Republican leaders expressed initial support for the plan because it would extend the current tax rates for everyone.

"I am optimistic that Democrats in Congress will show the same openness to preventing tax hikes the administration has already shown," Senate Minority Leader Mitch McConnell, R-Kentucky, said in a statement.

However, retiring Republican Sen. George Voinovich of Ohio indicated he would oppose the deal because the higher spending it calls for would add to the federal debt.

The deal includes the temporary two percentage-point reduction in the payroll tax to replace Obama's "making work pay" tax credit from the 2009 economic stimulus package for lower-income Americans. An administration source familiar with the talks said the one-year reduction of the payroll tax would bring savings of about $1,000 for someone making $50,000.

In a concession to Republicans, it sets the estate tax at 35% for two years on inheritances worth more than $5 million. That rate is a compromise between Democratic and Republican positions on the estate tax, which previously had been expected to be higher and apply to estates of $3.5 million or greater, a senior administration official told reporters.

House Democrats, who have approved a measure extending the Bush-era tax cuts for family incomes up to $250,000 a year, indicated earlier Monday they were unhappy with the negotiations that the White House was conducting with congressional Republicans.

"We won't rubber stamp a deal between the White House and (Senate Minority Leader) Mitch McConnell," one Democratic congressional source told CNN. "We want to make it clear. Don't take our support for granted."

House Speaker Nancy Pelosi, D-California, and Majority Leader Steny Hoyer, D-Maryland, were among Democratic leaders who attended a White House meeting with Obama and Biden to discuss the proposed deal.

According to the senior Democratic source, Obama and Biden told the congressional Democrats that the proposed deal was the best they could expect.

Liberal House Democrats are believed to be among the most reluctant in Congress to agree to a deal extending all of the 2001 and 2003 tax cuts.

The House measure, which was blocked from consideration in the Senate by a Republican filibuster, would cause tax rates to increase to 1990s levels for individuals making more than $200,000 a year and families earning more than $250,000. Senate Republicans blocked a similar proposal that set the income threshold for higher tax rates at anything over $1 million.

Obama noted that Republicans opposed to the Democratic plan to allow tax rates for the wealth to increase showed they would undermine any extension of current tax rates.

"Without a willingness to give on both sides, there's no reason to believe that this stalemate won't continue well into next year," Obama said. "This would be a chilling prospect for the American people whose taxes are currently scheduled to go up on January 1st because of arrangements that were made back in 2001 and 2003 under the Bush tax cuts. I am not willing to let that happen."

Senior administration officials who briefed reporters after the announcement said the extended unemployment benefits and tax credits in the deal justified the agreement to extend the Bush-era tax cuts for everyone for another two years. In particular, they cited the payroll tax cut for 2011 that would benefit directly benefit workers.

"We felt that if there was an opportunity to get significant tax relief to working families in 2011, that would be the most compelling thing to the economy," one of the senior administration officials said.

Top senators from both parties had indicated Sunday that a deal linking the extension of lower tax rates for everyone with extended unemployment benefits was likely. Congress would continue working on a long-term plan to reduce the nation's debt.

Democrats contend the nation must prevent working-class Americans from facing higher taxes, as promised by Obama in his 2008 election campaign, but can't afford the extra hundreds of billions of dollars it would cost to maintain the tax cuts for the wealthy. Republicans argue that the economy remains too weak to allow anyone's taxes to increase.

Earlier Monday, Obama reiterated his position that extending the cuts for the wealthiest Americans would be fiscally irresponsible, and stressed the opinion of Democratic leaders that an extension of unemployment benefits needs to be part of any agreement with the GOP.

"We have got to find consensus here because a middle-class tax hike would be very tough, not only on working families, it would also be a drag on our economy at this moment," Obama told an audience in Winston-Salem, North Carolina.

"We've got to make sure that we are coming up with a solution even if it is not 100% of what I want or what the Republicans want," he said.

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