Obama struggles to keep Dems from killing tax cuts

WASHINGTON (AP) - President Barack Obama struggled Tuesday to prevent wholesale defections by fellow Democrats that could sink the tax deal he worked out with Republicans - angry opposition that could subject millions of Americans to a big holiday-season tax increase.

Many GOP lawmakers seemed ready to embrace the Obama-GOP compromise and declare victory. The question was whether enough Democrats would join them in support, especially in the House, where liberal resentment of the president's concessions on tax breaks for the wealthiest runs strong.

Obama went on national TV to give a ringing defense of his compromise, declaring it the necessary price for heading off a tax increase that neither taxpayers nor the weak economy could stand and for gaining more months of unemployment payments for millions of jobless workers.

The compromise plan would extend unemployment benefits for millions of people, and reduce Social Security payroll taxes for a year. Workers would pay a 4.2 percent tax rate instead of 6.2 percent.

Democratic leaders in the House criticized the tax plan, sometimes harshly, but stopped short of saying they would try to block it.

In a 35-minute news conference, Obama chastised liberals for seeking ideological purity that would cause legislative logjams on vital issues. He didn't spare Republicans, either, likening them to "hostage takers" willing to hurt the great majority of Americans for the "holy grail" of extending tax cuts for millionaires.

Obama said no one is entirely happy with the compromise he crafted with Republicans, but "it's a good deal for the American people."

"This country was founded on compromise," he said.

If Democrats kill the tax plan, it would mark a stunning defeat for Obama and a huge political bet that voters will blame Republicans as much as Democrats for an impasse that leads to higher taxes starting Jan. 1. Few on Capitol Hill believe Democrats will take that gamble.

But liberal lawmakers' discontent is hard to measure in the wake of last month's big election setbacks.

Despite their minority status, Senate Republicans managed last week to block Obama's long-promised bid to end Bush-era tax cuts for households earning more than $250,000. They insisted that all the tax cuts from 2001 and 2003, scheduled to expire in three weeks, be extended, for rich and poor alike.

"I have not been able to budge them," Obama said. Without a compromise, he said, 2 million unemployed people "may not be able to pay their bills, and tens of millions of people who are struggling right now are suddenly going to see their paychecks smaller" because of income tax increases.

"I'm not here to play games with the American people or the health of the economy," he said.

Besides the most-publicized proposals, the plan would continue other programs such as enhanced tuition tax credits for college and breaks for businesses that hire new workers. And it would set the estate tax at a rate preferred by Republicans.

Under current law, the estate tax, which was repealed for 2010, is scheduled to return next year with a top rate of 55 percent. Obama's package would set the top rate at 35 percent, and each spouse could exempt up to $5 million from taxation.

Overall, officials said, the plan could increase federal borrowing by $900 billion.

The lower estate tax emerged as the biggest obstacle among many House Democrats. Pelosi called it "a bridge too far."

Unless both houses approve some version of the tax proposal before Congress adjourns this month, income taxes will rise for virtually all workers. Democrats hinted Tuesday they wanted a few more sweeteners to make the package less distasteful, but it wasn't clear what they might be.

"We're going to have to do some more work," Senate Majority Leader Harry Reid said after a closed-door meeting with Vice President Joe Biden and other Democratic senators.

Many House Democrats emerged from a spirited closed-door caucus Tuesday evening and said they would have a difficult time supporting the package.

"I don't think that the president should count on Democratic votes to get this deal passed," said Rep. Anthony Weiner, D-N.Y. "It's a bad deal that wasn't skillfully negotiated."

Rep. Earl Pomeroy, D-N.D., said, "It seems to me this Congress should not be adding substantially to the deficit."

House Democrats will lose their majority in January, but they still hold a 255-179 advantage in the current Congress that has a few more days of life.

Democratic staff members speculated that, for now, more than half of House Democrats seem inclined to oppose the compromise plan. Republican aides said many GOP members probably would back it, because it grants their chief goal of extending income tax cuts for all Americans.

Some moderate Democratic lawmakers praised the plan. The office of Rep. Gerry Connolly, D-Va., noted that he long has supported "the position now embraced by President Obama for extending all of the Bush tax cuts, temporarily."

But some of Obama's closest allies assailed the compromise.

"It lards the tax cuts for the top 2 percent with an indefensible cut in the estate tax - giving yet another bonus to the super-rich," said AFL-CIO President Richard Trumka. "It is unconscionable that the price of support for struggling middle class families and workers who have been unable to find jobs for months and months and months is yet more giveaways for our country's wealthiest families."

The liberal group MoveOn said its 5 million members oppose the tax plan. "The president's commitment to bipartisanship should not mean leaving principles behind," MoveOn said.