go along. They could hardly be for allowing taxes to go up, especially in an election year.
McConnell and Kyl insisted, so Boehner again said fine. But given Cantor’s hesitation, McConnell told Biden that if they went along with the payroll tax cut, he needed something more to sweeten the deal. Kyl wanted to change estate tax rates, which were scheduled to rise to 55 percent with a $1 million exemption when the Bush tax cuts expired. The White House would have to accept a drop in the estate tax rate to 35 percent with a $5 million exemption for two years. This was a pet plan of Kyl’s and of Arkansas Senator Blanche Lincoln, a Democrat.
“It’s just terrible,” Sperling said when he heard the proposal. Obama and Biden were outraged. This was classic special interest legislation that might apply to only 6,000 to 7,000 families and would cost the Treasury $25 billion.
Geithner told the president there was a principle involved. “The only way you can possibly do Kyl-Lincoln is if they give us everything.”
• • •
Biden knew House Democrats were anxious about the White House cutting its own deal with the Republicans, so on Saturday night, December4, Biden had the Democratic leaders, Pelosi and Hoyer, and Maryland Representative Chris Van Hollen, a top Democrat on the House Budget Committee, to dinner at the vice president’s residence. There as backup were Geithner, Lew and Schiliro. Biden mentioned that all kinds of ideas were being explored with the Republicans. We’re not really negotiating, he said. He did not mention extending the Bush tax cuts, the most explosive issue. You’ll be in the loop, don’t worry about it, there’s no deal yet.
As usual, there were a great many players to be kept in the loop, and with the “tax thing” deadline coming closer each day, the loop was beginning to feel like a noose.
The next day, Biden and McConnell agreed to a basic two-year extension of all the Bush tax cuts ($544 billion), the payroll tax cut for a year (now $112 billion), the Kyl-Lincoln estate tax plan (at least $25 billion), and extension of unemployment insurance for 13 months ($56.5 billion). Other provisions favored by the Republicans allowed businesses of any size to entirely write off the cost of equipment or other capital investments for the next year. Businesses would save an estimated $150 billion in taxes. In addition, the highest rate on capital gains and dividends would remain at 15 percent for two years. Other details remained unfinished, but both men knew they were close to a deal.
• • •
On Monday, Biden called Pelosi and other key House Democrats to the White House Roosevelt Room to give them the good news.
“We got a good deal,” Biden said. “I told your leaderships on Saturday night when they were at my house that we were working on this,” and here it is. He attempted to summarize, mentioning now that the Bush tax cuts for all would be extended for two years.
Blindsided, the House Democrats erupted. There were raised voices, raw emotions, even shouts of anger.
“I thought we were going to be part of these negotiations,” said Van Hollen. “I thought I was going to be at the table. We weren’t at the table.”
This is brutal, thought Sperling, who was backstopping the vice president. He knew it was a bitter pill, having to extend the Bush tax cuts for the top income brackets. In the White House they were grieving too, but they’d had time to come to terms with the idea.
“Speaker Pelosi,” Sperling interjected, “remember what we did in ’93? Remember when we passed the Earned Income Tax Credit? I went back and totaled up how much difference that made. It was like $150 billion to $200 billion.” The EITC, a “refundable” credit, reduces the tax burden on poor and middle-class families, and if the amount of the credit exceeds taxes owed, the difference is “refunded” to the taxpayer. It will be extended under the new agreements, he said, and they
McConnell and Kyl insisted, so Boehner again said fine. But given Cantor’s hesitation, McConnell told Biden that if they went along with the payroll tax cut, he needed something more to sweeten the deal. Kyl wanted to change estate tax rates, which were scheduled to rise to 55 percent with a $1 million exemption when the Bush tax cuts expired. The White House would have to accept a drop in the estate tax rate to 35 percent with a $5 million exemption for two years. This was a pet plan of Kyl’s and of Arkansas Senator Blanche Lincoln, a Democrat.
“It’s just terrible,” Sperling said when he heard the proposal. Obama and Biden were outraged. This was classic special interest legislation that might apply to only 6,000 to 7,000 families and would cost the Treasury $25 billion.
Geithner told the president there was a principle involved. “The only way you can possibly do Kyl-Lincoln is if they give us everything.”
• • •
Biden knew House Democrats were anxious about the White House cutting its own deal with the Republicans, so on Saturday night, December4, Biden had the Democratic leaders, Pelosi and Hoyer, and Maryland Representative Chris Van Hollen, a top Democrat on the House Budget Committee, to dinner at the vice president’s residence. There as backup were Geithner, Lew and Schiliro. Biden mentioned that all kinds of ideas were being explored with the Republicans. We’re not really negotiating, he said. He did not mention extending the Bush tax cuts, the most explosive issue. You’ll be in the loop, don’t worry about it, there’s no deal yet.
As usual, there were a great many players to be kept in the loop, and with the “tax thing” deadline coming closer each day, the loop was beginning to feel like a noose.
The next day, Biden and McConnell agreed to a basic two-year extension of all the Bush tax cuts ($544 billion), the payroll tax cut for a year (now $112 billion), the Kyl-Lincoln estate tax plan (at least $25 billion), and extension of unemployment insurance for 13 months ($56.5 billion). Other provisions favored by the Republicans allowed businesses of any size to entirely write off the cost of equipment or other capital investments for the next year. Businesses would save an estimated $150 billion in taxes. In addition, the highest rate on capital gains and dividends would remain at 15 percent for two years. Other details remained unfinished, but both men knew they were close to a deal.
• • •
On Monday, Biden called Pelosi and other key House Democrats to the White House Roosevelt Room to give them the good news.
“We got a good deal,” Biden said. “I told your leaderships on Saturday night when they were at my house that we were working on this,” and here it is. He attempted to summarize, mentioning now that the Bush tax cuts for all would be extended for two years.
Blindsided, the House Democrats erupted. There were raised voices, raw emotions, even shouts of anger.
“I thought we were going to be part of these negotiations,” said Van Hollen. “I thought I was going to be at the table. We weren’t at the table.”
This is brutal, thought Sperling, who was backstopping the vice president. He knew it was a bitter pill, having to extend the Bush tax cuts for the top income brackets. In the White House they were grieving too, but they’d had time to come to terms with the idea.
“Speaker Pelosi,” Sperling interjected, “remember what we did in ’93? Remember when we passed the Earned Income Tax Credit? I went back and totaled up how much difference that made. It was like $150 billion to $200 billion.” The EITC, a “refundable” credit, reduces the tax burden on poor and middle-class families, and if the amount of the credit exceeds taxes owed, the difference is “refunded” to the taxpayer. It will be extended under the new agreements, he said, and they
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