House Democrats block GOP-Obama tax deal. Is it dead?

House Democrats threw a monkey wrench into President Obama’s tax cut compromise with Republicans Thursday, adopting a resolution that opposes the deal.

The resolution is nonbinding, but House Speaker Nancy Pelosi nevertheless will not bring the tax-cut agreement to the floor as is. The exact nature of any changes remains unclear, but House Democrats have made clear that they do not like the planned extension of Bush-era tax cuts for top earners and a restoration of the estate tax that exempts most people.

In the end, analysts expect a tax-cut deal to go through, likely with some changes aimed at satisfying Democrats, but with the bulk of the votes needed for passage coming from Republicans. Senate Democrats, largely supportive of the plan, are prepared to move on legislation as early as this weekend.

Time is of the essence, as the clock winds down on the lame-duck session of Congress. Absent legislation, taxes on all income brackets will rise on Jan. 1, and unemployment benefits will expire for 2 million jobless Americans.

In remarks Thursday in a meeting with the President’s Export Council, President Obama urged Congress to move forward on “this essential priority.”

“The bipartisan framework that we’ve forged on taxes will not only protect working Americans from seeing a major tax increase on Jan. 1; it will provide businesses incentives to invest, grow, and hire,” Mr. Obama said. “And every economist that I’ve talked to or that I’ve read over the last couple of days acknowledges that this agreement would boost economic growth in the coming years and has the potential to create millions of jobs.”

The White House has mounted an unprecedented lobbying effort aimed at passing the compromise fast and intact.

Vice President Biden, a former senator, has been working his old colleagues on the Hill. The White House communications shop has blasted out dozens of e-mails touting the support of dozens of Democratic elected officials from around the country.

Top economic adviser Larry Summers, who leaves the administration at the end of the year, warned on Wednesday that a failure to pass this deal – imperfect as it may be – could be highly damaging to the economy.

"If they don't pass this bill in the next couple of weeks," Mr. Summers told reporters at a briefing, "it would materially increase the risk the economy would stall out and we would have a double dip [recession]."

For the Democrats, too, there are political reasons to get this deal finished as quickly as possible. In January, all the new members of Congress elected in November will take their seats on Capitol Hill, with the Republicans taking control of the House and adding to their caucus in the Senate, though not enough for a majority.

In a press conference Tuesday, Obama stated that he got the best deal he could, and that if the issue held over into January, the Republicans would be in an even stronger position. Some Republicans have expressed opposition to the current version of the plan, arguing that the Bush tax cuts should be made permanent across the board, including for the wealthy – a segment of the tax-paying public that includes some small businesses.

Deficit hawks are also unhappy with the tax-cut compromises, arguing that they add nearly $1 trillion to the national debt in the next two years. Just a week ago, the president’s bipartisan fiscal commission came out with a package of tough recommendations – both tax increases and spending cuts – and already, that feels like ancient history. None of the elements of the Obama-GOP package are paid for with offsetting cuts.

As much as objecting to the content of the deal, House Democrats are expressing insult that they weren’t consulted during the negotiations. They also believe Obama simply didn’t push hard for a better deal, and should have called the Republicans’ bluff on allowing middle-class tax cuts and unemployment benefits to expire on Dec. 31.

“Do you really think the Republicans are going to go home for Christmas having just taken families and devastated them,” Rep. Peter DeFazio (D) of Oregon, author of the resolution rejecting the tax deal, said Thursday, according to Politico. “I think they’re bluffing on unemployment, and if they want to do that, I want to have that fight and so do a lot of other Democrats.”