Obama-Republican tax bill easily clears Senate hurdle

WASHINGTON -- Far-reaching legislation to avert a Jan. 1 income tax increase for millions won overwhelming support in a Senate test vote Monday, propelled by an uneasy and unusual alliance between the White House and lawmakers in both parties.

President Barack Obama said even before it was announced that the 83-15 vote proved "that both parties can in fact work together to grow our economy and look out for the American people."

Senate passage of the bill is expected as early as today, and in a brief appearance at the White House, Obama called on the House to follow suit quickly. He spoke amid indications that a revolt among House Democratic liberals was ebbing, further improving prospects for quick enactment.

The legislation would provide a two-year reprieve in the tax increases scheduled to take effect Jan. 1 at all income levels, reduce Social Security taxes for every wage earner in 2011 and extend an expiring program of jobless benefits for the long-term unemployed.

It also includes a scaled-back estate tax that Republicans support and has become a source of Democrats' discontent. The bill's overall cost, estimated at $858 billion over two years, would be added to already huge federal deficits.

The legislation presents a postelection reach across party lines after two years of gridlock. Republicans wanted a permanent extension of all the tax cuts enacted when George W. Bush was president, while Democrats insisted rates be permitted to rise on incomes over $200,000 for individuals and $250,000 for couples.

In his remarks, Obama gave no indication he was willing to accept further changes to the plan he negotiated with senior Republicans.

"I understand those concerns," he said of objections from some of his usual allies in Congress. "I share some of them. But that's the nature of compromise, sacrificing something that each of us cares about to move forward on what matters to all of us."

The remarks were directed largely at Democratic critics who last week vowed to prevent the bill from coming to the floor unless it was changed to scale back the billions in relief ticketed to the wealthy.

But with lawmakers eager to adjourn for the year, officials said that demand appeared to be fading. Under discussion is an alternative approach that would bring the bill up for debate as drafted, with opponents of the estate tax provision given a chance to change it if they can gain the necessary votes.

Despite strong criticism from fellow Democrats, Obama has made passage of the bill a key year-end priority, calling it essential for the economy as it struggles to recover from the worst recession in decades.

The Senate vote was never in doubt, and the total was well above the 60 needed for the legislation to advance. Nine Democrats and five Republicans voted to block the bill, as did Sen. Bernie Sanders, a Vermont independent who spoke against it last Friday in an eight-hour speech on the Senate floor.

Senate Majority Leader Harry Reid, D-Nev., and his GOP counterpart, Mitch McConnell of Kentucky, were joint sponsors of the bill, a symbolic gesture of bipartisanship on an issue that produced nothing but gridlock until midterm elections gave Republicans additional leverage in negotiations.

"We're telling the American people to keep money that's rightfully theirs, so they can spend it and invest it as they please," said McConnell.

In a jab at Democrats, he added, "This is an important shift, and the White House should be applauded for agreeing to it."

Sen. Max Baucus, D-Mont., who chairs the Senate Finance Committee, said, "This bipartisan compromise is about creating jobs. Extending middle class tax cuts will help create jobs. ... Job creation needs to be our number one priority."

The compromise emerged a week ago after private talks involving the White House and top leaders in Congress, including Republicans who emerged from midterm elections with significantly increased strength.

In the days since, Obama has drawn strong criticism from liberals unhappy that he agreed to changes in the estate tax and income tax that will benefit the rich. Firing back, he said failure to compromise would produce gridlock at a time the economy is still frail and unemployment is at a persistently high rate of 9.8 percent.

The administration's outgoing top economic adviser, Lawrence Summers, said in a speech a few hours before the vote that the agreement should increase consumer spending and help the economy "now and for the next several years."

On the other end of the political spectrum, some conservatives have spoken out against the bill, saying that the renewal of jobless benefits should be offset by spending cuts elsewhere in the budget.

In fact, even supporters of the bill were at pains to point out parts they found objectionable.

Baucus singled out the decision to leave tax rates unchanged on upper income earners.

Sen. John McCain, R-Ariz., highlighted a series of energy tax breaks added to the bill late last week, including an extension of the federal subsidy for ethanol.

McConnell cited "the Democrats' insistence that we borrow the money we need to pay for a further extension of unemployment insurance. In my view, if both parties agree that the debt is a serious problem, we shouldn't be writing checks that we don't have the money to cover."