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Thursday, November 11, 2010

Democrats pulled in different directions on taxes, deficits

By Michael O'Brien - 11/11/10 11:18 AM ET

Fissures within the Democratic Party that were kept at bay by the midterm elections have resurfaced this week thanks to emerging debates over taxes and deficits.

Liberal and centrist Democrats are staking out disparate positions on fiscal issues in light of a draft report issued Wednesday by the chairmen of President Obama's fiscal commission.


A key centrist, Senate Budget Committee Chairman Kent Conrad (D-N.D.), on Thursday championed the recommendations made by fiscal panel co-chairmen Erskine Bowles and Alan Simpson. Their report called for major tax reforms and spending cuts, in addition to entitlement changes that would result in reduced Social Security benefits for some people. 

Liberals have roundly condemned the report. One of the strongest statements came from outgoing House Speaker Nancy Pelosi (D-Calif.), who called the recommendations "simply unacceptable."

But Conrad, a centrist in a position to shape the debate over the fiscal commission's final proposals in the Senate, challenged critics to come up with something better.

"Instead of shooting this down, propose an alternative; but one that does as good a job as this one does in getting us back on a sound fiscal course," he said on ABC's "Good Morning America."

Internal divisions on fiscal issues forced Democratic leaders to punt key votes until after the election. But with a lame-duck session set to begin next week, lawmakers will be forced to reckon with several major items, not the least of which is a debate over the tax cuts that are set to expire at the end of the year.

President Obama had led congressional Democrats in opposing an extension of tax breaks for the highest income bracket, while Republicans had insisted on extending all the tax cuts for at least two years, if not permanently.

But now, chastened by the result of last week's GOP wave in the midterm elections, the White House is signaling it might blink first in the tax cut showdown.

White House senior adviser David Axelrod on Thursday indicated the administration might be willing to accept a short-term extension on tax cuts for all income brackets if it were the best option for maintaining cuts for the middle class.

"We have to deal with the world as we find it," Axelrod told the Huffington Post. "The world of what it takes to get this done."

The apparent concession by the administration could hand an early political victory to congressional Republicans before they even take power in the House, giving the GOP an opportunity to partner with centrist Democrats to pass tax cuts.

The office of incoming Speaker John Boehner (R-Ohio) played up the gulf between Democrats in the tax debate.

"We're glad to see that the president's most trusted adviser now agrees with this course of action, and hope he and the president will show leadership by convincing Speaker Pelosi to stop these tax hikes permanently in the upcoming lame-duck session," said Michael Steel, a spokesman for Boehner.

Liberal groups, which have had a stormy relationship with the White House, are adamant that Obama should not compromise.

"The White House and congressional leaders need to say we are scheduling one vote, one vote only, and that vote is on renewing the middle-class tax cuts — and if Republicans want to oppose tax cuts for 98 percent of Americans, we dare them to and will pummel them politically if they do," said Adam Green, co-founder of the Progressive Change Campaign Committee in response to Axelrod.

Many centrist Democrats backed a temporary extension of the tax cuts while campaigning for reelection, aligning themselves more with Republicans than Democratic leaders, who had been closed to compromise on the tax issue.

Those centrists are also in a pivotal position to help determine how lawmakers will proceed with the final recommendations of the fiscal commission, which are due Dec. 1. Democratic and Republican leaders have promised to hold an up-or-down vote on any deficit reduction proposals supported by 14 of the commission’s 18 members.

Both Republican and Democratic leaders are facing pressure from their base over the commission's final report. Conservatives are worried about tax hikes in the proposal, and GOP members of the fiscal commission have been cautious about the recommendations that came out Wednesday.

Liberal lawmakers, meanwhile, have largely committed to voting down any plan that curtails Social Security — a component that will likely be in the final report.

Conrad encouraged colleagues to ignore the pressure and chart the best course for the budget, even if it costs them their jobs.

"If some of us have to sacrifice a political career to get this country back on track, then so be it," he said. "It has to be done."    

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