Thu, Dec 22, 2011 - Page 7 News List

Obama, Boehner lock horns in tax fight

MOVING THE GOALPOSTS:The Republicans’ demand for a year extension of a payroll tax cut was a surprise because they questioned the benefits of such a move for months

Reuters, Washington

US President Barack Obama demanded on Tuesday that Republicans in the US House of Representatives pass a short-term extension of a payroll tax cut, showing an unwillingness to back down in a fight that could result in higher taxes for 160 million Americans.

The Republican-led House earlier rejected a short-term deal passed by Democrats and fellow Republicans in the US Senate over the weekend and called for fresh negotiations on the expiring tax break that saves the average US worker US$1,000 a year.

As both sides dug more deeply into entrenched positions, House Speaker John Boehner, the top Republican in the US Congress, demanded that Obama order Senate Democrats back into session to haggle over a year-long extension.

“I need the president to help out,” Boehner told reporters, drawing applause from a large group of Republican lawmakers standing behind him in the Capitol building.

The show of solidarity stood in contrast to the revolt by conservative and Tea Party-backed House Republicans after Boehner was reported to have initially sought their support for the shorter extension over the weekend.

Boehner has struggled to -control his restive caucus all year, with many members refusing to negotiate with Democrats, pushing the federal government to the brink of three shutdowns and the edge of a debt default.

In a surprise appearance in the White House briefing room, a visibly frustrated Obama told lawmakers to put politics aside.

“Let’s not play brinkmanship,” he said. “The clock is ticking. Time is running out and if the House Republicans refuse to vote for the Senate bill or even allow it to come up for a vote, taxes will go up in 11 days,” he said.

Prospects for the Democratic-controlled Senate reopening -negotiations remained dim as Senate Majority Leader Harry Reid insisted he would not reconvene the chamber. Reid has won backing from some Republicans in the Senate, who have called on their colleagues in the House to back the deal.

Reid “will stick to his guns” and refuse to reopen negotiations, a senior Democratic aide said after the House vote.

“Taxes will go up — or Boehner will cave,” the aide said.

Both parties believe they have the upper hand in the year-end battle. Republicans are betting Democrats fear a voter backlash for next year if the tax break expires and will eventually bow to their demands. Democrats, however, are gambling the same is true for Republicans.

The House Republican demand for a one-year extension marks a surprising turnabout since for months they have been openly skeptical of its economic benefits. Now they argue a two-month extension creates uncertainty for workers and employers and is unworkable.

The Senate passed the short-term extension on Saturday because Republicans and Democrats could not agree on how to pay for it for a full year. It was not clear how House Republicans hope to overcome that hurdle.

The US Department of the Treasury weighed into the debate for the first time, saying while it would prefer a full-year extension, it could ensure the smooth implementation of the short-term measure for employers.

Failure to extend the tax break and benefits for millions of unemployed Americans, which expire on Dec. 31, could heighten the possibility of a US recession next year, some economists have warned.

“You’re either going to have an OK rate of economic growth next year or a pretty subpar one, and it will be determined in large part by US politicians,” said Eric Lascelles, chief economist at RBC Global Asset Management in Toronto.

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