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Obama, GOP Reach Deal On Tax Cuts

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Obama, GOP Reach Deal On Tax Cuts

Politics

Obama, GOP Reach Deal On Tax Cuts

Obama, GOP Reach Deal On Tax Cuts

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President Obama says he's reached the outlines of a deal with congressional Republicans to extend all of the Bush-era tax cuts for at least two years. In exchange, Obama wants to extend unemployment benefits to people who've been out of work for more than six months. For more, guest host Guy Raz talks to NPR's Scott Horsley.

MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

GUY RAZ, host:

And I'm Guy Raz.

President Obama says he's reached the outlines of a deal with congressional Republicans to extend all of the Bush-era tax cuts for at least two years. In exchange, Republicans would agree to extend unemployment benefits to people who have been out of work for more than six months.

The president is also calling for additional tax breaks aimed at helping the middle class, including a temporary reduction in the payroll taxes that fund Social Security and Medicare.

For more, we're joined by NPR's Scott Horsley at the White House. Scott, most Democrats, including the president, wanted to end the tax cuts for America's wealthiest families. What's changed?

SCOTT HORSLEY: Well, Guy, the Democrats lost the game of chicken here. There's a deadline coming at the end of this month. If no action were taken, taxes were going to go up for everyone. Democrats tried to extend the tax breaks only for those making less than a quarter million dollars a year, and Senate Republicans called their bluff over the weekend, effectively saying we're willing to let taxes go up for everyone in order to protect tax cuts for the very wealthy.

President Obama said that's took risky.

President BARACK OBAMA: I'm not willing to let working families across this country become collateral damage for political warfare here in Washington. And I'm not willing to let our economy slip backwards just as we're pulling ourselves out of this devastating recession.

HORSLEY: So the president says he's now willing to compromise to avoid having taxes go up for middle-class families. Remember, his bargaining position is only going to get worse next year when the new Congress is sworn in.

RAZ: Scott, what else is the president hoping to get out of the deal?

HORSLEY: Well, a big part is that extension in unemployment benefits. You know, ordinarily, jobless benefits run out after six months. Congress has repeatedly extended that during the recession. The latest extension ran out last week, and that meant more than one and a half million people were going to lose their jobless benefits during the Christmas season. This extends that for another 13 months.

Mr. Obama is also calling for extending some other tax cuts that are a special interest to working families. He's not including his signature tax cut, the so-called Making Work Pay cut that was a part of the stimulus plan. Instead, he wants to see a cut in the payroll tax, the portion of the payroll tax that workers pay.

RAZ: And, Scott, it's not clear how these tax cuts would be paid for. What would it do to the deficit?

HORSLEY: Well, they won't be paid for. No one is suggesting that these will be paid for, and so in the short run this will make the deficit worse - hundreds of billions of dollars worse. Now, that's less red ink than would have been spilled if the tax cuts had been made permanent. And Mr. Obama says he hopes that over the next two years, while these tax cuts are being extended, it will become apparent that at least some of the cuts need to sunset if the country's going to get its budget under control.

RAZ: Last week, of course, there were some discouraging job numbers out. The unemployment rate ticked up to 9.8 percent. What are these cuts expected to do for the economy?

HORSLEY: Well, sadly, Guy, perhaps not a whole lot. When the Congressional Budget Office looked at ways to stimulate the economy, it said that extending the Bush-era tax cuts ranked dead last.

Some of the other features in this deal could be more helpful. The payroll tax holiday for workers would put more money into people's pockets. That could have some economic benefits. The extension of unemployment benefits, of course, that money is going to be spent, you can pretty well guarantee, and so that will help the economy. But when it comes to the biggest portion of this deal, the extension of the Bush-era tax cuts, there's just not a whole lot of economic bang in those bucks.

RAZ: Now, Scott, a lot of Democrats in and out of Congress are not happy about the president's compromise. What is the White House doing to keep members of his own party, the president's own party in line?

HORSLEY: Yeah, that may be one of President Obama's toughest challenges here. He met with congressional Democratic leaders this afternoon. There's going to be more hand-holding when Democrats meet on Capitol Hill tomorrow.

And right now, the president's asking both Democrats and Republicans not to play politics.

Pres. OBAMA: These are not abstract fights for the families that are impacted. Two million people will lose their unemployment insurance at the end of this month if we don't get this resolved. Millions more of Americans will see their taxes go up at a time when they can least afford it.

RAZ: President Obama speaking at the White House earlier today. Scott Horsley is at the White House covering the story. Scott, thanks so much.

HORSLEY: Good to be with you.

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