Obama Signs Tax-Cut Package Into Law: McConnell on Hand, Pelosi MIA

After weeks of contentious debate, President Obama on Friday signed into law an $858-billion tax package that will temporarily extend the Bush-era tax cuts for all Americans for two years, extend unemployment insurance for the next 13 months, enact a one-year payroll tax holiday in 2011, set the estate tax at 35 percent for properties valued over $5 million and extend a raft of stimulus-related tax incentives for another year.

Calling the bill a "substantial victory for middle-class families across the country," Obama highlighted the fact that working Americans will see not only an extension of the Bush-era tax cuts, but an increase in their paychecks -- courtesy of the payroll tax holiday that begins Jan. 1. Said the president, "This is real money that's going to make a real difference."

President Obama also trumpeted bipartisan support for the legislation, which passed in the House late Thursday night by a vote of 277 to 148, and which the Senate easily passed Wednesday by a vote of 81-19. But it remained clear that at least a few Democrats were still quite unhappy about the compromise.

Underscoring this rift, Speaker of the House Nancy Pelosi was not in attendance at the bill's signing. According to ABC News, Pelosi was working on negotiating the Continuing Resolution -- which provides financing for the federal government into the next year. However, Senate Minority Leader Mitch McConnell (R-Ky.) -- one of the main architects of the package, alongside President Obama -- was on stage at the signing ceremony. In his remarks, the president made special note of Sen. McConnell's work, as well as that of GOP Congressman David Camp (R-Mich.), who was also in attendance.
Also flanking Obama at the ceremony were Sen. Max Baucus (D-Mont.), Sen. Dick Durbin (D-Ill.), Rep. Danny Davis (D-Ill.), Rep. Allyson Schwartz (D-Pa.), Rep. Rob Andrews (D-N.J.), and administration officials Treasury Secretary Tim Geithner and Office of Management and Budget Director Jack Lew.

Looking ahead to the next session of Congress, President Obama reiterated his desire to tackle broader economic issues, including the ballooning federal deficit. Understanding the difficult choices that lie ahead, he savored -- however briefly -- a moment of peace in what is likely to be a battle-heavy season. "There will be times" Obama said, smiling, "in which the holiday spirit won't be as abundant as it is today."

While the bill is a significant victory for Obama, it also created a wedge of distrust between the president and congressional liberals who had pinned their hopes for a progressive agenda and feel he has stopped fighting for their dream.

House leaders felt the fury of the liberal opposition to the package Thursday as they stumbled going into votes setting the debate parameters and realized they did not have enough support to get past the procedural hurdles. The leadership regrouped in the afternoon to devise a process that liberal Democrats could support. After the caucus meeting, which Rep. Louise Slaughter (D-N.Y.) called "raucous," the House resumed debating the bill until its passage just before midnight.

A coalition of 112 Democrats and 36 Republicans voted against the measure, while 139 Democrats and 138 Republicans voted for it.

Rep. Sheila Jackson Lee (D-Texas) said the overall package would not help working people enough, while it would help the wealthy more than they needed.

"This is not about fighting against someone who has a few more dollars than the next person," she said. "It is to do what we're sent here to do, which is to make sure that this capitalistic system works for everybody, including those who are not employed."

The bill will extend the expiring Bush tax cuts for all income levels for the next two years. Specifically, it will continue the 10 percent tax bracket and keep the brackets of 25 percent, 28 percent, 33 percent and 35 percent, instead of reverting to 28 percent, 31 percent, 36 percent and 39.6 percent. It will also continue to tax capital gains and dividends at 0 percent and 15 percent, depending on income, instead of letting the rates go back to 10 percent and 20 percent for capital gains and marginal tax rates for dividends.

The legislation also temporarily cuts the 6.2 percent payroll tax for all workers to 4.2 percent and extends unemployment benefits for 13 months for Americans out of work up to 99 weeks.

The bill continues dozens of tax breaks and credits for people from the bottom of the income spectrum to the top. It patches the Alternative Minimum Tax for two years; extends the college tuition tax credit, child tax credit and Earned Income Tax Credit for two years; allows businesses to deduct 100 percent of certain investments in the first year; and provides a buffet of tax credits to businesses and industries from filmmakers to rum producers to coal miners and railroad operators.

Particularly galling to liberal Democrats, the bill also sets the estate tax at 35 percent for estates valued at more than $5 million, well below the 45 percent rate on estates over $3.5 million that most Democrats had been pushing for.

The pricetag for the two-year tax cut bonanza has been estimated at $860 billion, a cost that several Democrats, including Rep. Peter DeFazio (D-Ore.), said was too high.

"Every other major industrial nation on Earth is talking about buckling down a little bit and austerity measures and having a sustained recovery. But no, not here!" he yelled on the House floor just before the vote. "We got out the credit card. And guess what? Our kids and grand kids are going to be paying that bill for 30 years."

Some Republicans who supported the measure did so with reservations.

"I don't like this bill that's before us, but I like even less the idea of increasing the tax burden on working Americans," said Rep. David Drier, the top Republican on the Rules Committee, who voted for the bill.

But Drier's Republican colleague, Rep. Mike Pence of Indiana, rose to say he would oppose it because the extensions did not go far enough.

"It's a bad deal for taxpayers; it will do little to create jobs and I cannot support it," Pence said. "This is a tough call. No Republican in this Congress wants to see taxes raised on any American, but uncertainty is the enemy of prosperity."