WASHINGTON – US president Barack Obama’s plans to extend tax cuts for all Americans ran into trouble yesterday as his fellow Democrats questioned whether he had been too quick to compromise with Republicans.
While analysts say the deal Mr Obama struck with Republicans will still likely be passed in Congress, the president risked a rift with many in his party who are already upset at heavy losses in last month’s mid-term elections.
Stock markets in the United States and Europe responded favourably to the tax deal, which would keep the current low rates in place for another two years even for the nation’s richest households.
But support remained unclear among Democrats, who sought tax reductions only for the lower and middle classes before they hand over control of the House of Representatives to Republicans in January.
Mr Obama was scheduled to hold a news conference last night at which he was expected to discuss the compromise with Republicans that he unveiled on Monday to extend until 2012 the tax cuts enacted under Republican former President George W Bush.
The deal calls for a 13-month extension of unemployment benefits, which could placate Democrats, but Mr Obama also conceded Republican demands on the estate tax, by proposing a 35 per cent tax with a $5 million individual exemption level.
House Speaker Nancy Pelosi said Democrats would “continue discussions” on the deal in coming days. Representative Steny Hoyer, the No 2 House Democrat, said he had not yet decided whether to back it.
“We had a long meeting yesterday with the president. There was at that point in time no consensus or agreement reached by the House leadership,” Mr Hoyer said.
Taxes would go up for almost all Americans if no extension is approved, and analysts predicted the measure would ultimately become law as enough Republicans would back the deal to offset the Democrats who oppose it.
Vice-President Joe Biden was in Capitol Hill yesterday to sell the deal at a lunchtime meeting with Senate Democrats and an evening meeting with those in the House.
The White House pointed out that the deal would achieve Democrats’ priority by preventing a tax increase for working families that would average $3,000.
It would also help those struggling in the wake of the worst recession since the 1930s, they said.