- The Washington Times - Tuesday, September 28, 2010

The Democrats’ agenda of jobs and tax cuts has begun to lose support within the party’s own ranks, even as House and Senate members rush to finish their pre-election business and return home to seek votes for November’s midterms.

A last-ditch jobs bill backed by Senate Democrats, designed to punish companies that shift jobs overseas, collapsed in the face of a bipartisan filibuster Tuesday, even as nearly four dozen House Democrats signed a letter breaking with party leaders and urging that at least some of the George W. Bush-era tax cuts for higher-income taxpayers be extended past the end of this year.

The moves mark a rocky ending as Congress puts off much of its agenda and seeks to adjourn this week with plans to return after the elections in order to pass spending bills, address the tax cuts and possibly tackle immigration, as well as the Pentagon’s “don’t ask, don’t tell” policy of gays in the military, and climate-change legislation.

The setbacks also highlight the internal struggle among Democrats over the direction of the U.S. economy and fears among some rank-and-file Democrats that their leaders’ policies could hurt chances for a recovery.

“Our economy is fragile. We need tax policies that will promote our recovery,” the rebellious House Democrats said in their letter to Speaker Nancy Pelosi. “Raising taxes on capital gains and dividends could discourage individuals and businesses from saving and investing. We urge you to maintain the current tax rate for both dividend and long-term capital gains taxes.”

President Obama continued to fight apathy among Democratic voters, a day after Vice President Joseph R. Biden Jr. said the party’s dispirited political base needs to “stop whining get out there and look at the alternatives” presented by Republicans.

“If folks sit on the sidelines, and if Republican leaders in Washington get more votes come this November, then the impact on the lives of Americans, from tax cuts to the strength of our schools to the strength of our economy, will be profound,” White House spokesman Bill Burton told reporters traveling with Mr. Obama to a rally at the University of Wisconsin-Madison.

But cracks are showing in Democrats’ front.

Five members of Democratic Senate caucus — including independent Sen. Joe Lieberman of Connecticut — voted with Republicans to filibuster their leadership’s job bill Tuesday. Among the “no” votes was Senate Finance Committee Chairman Max Baucus, who earlier argued the measure would leave U.S. companies at a “competitive disadvantage.”

Senate Republicans were quick to point up the failed Democratic push.

“With just three days left in the Democrats’ two-year experiment in expanded government, they want to make a good last impression with a bill that they know has no chance of passing and which they have no interest in passing,” said Senate Minority Leader Mitch McConnell, Kentucky Republican. “This is about as pure a political exercise as you can get.”

The bill would have offered a payroll tax break to companies that move foreign-based jobs to the United States and would have withdrawn tax write-offs available to companies that laid off U.S. workers and replaced them with employees overseas.

The Democrats’ previous job-creation bill, a small-business lending fund, fared somewhat better. It gained enough Republicans to overcome a Senate filibuster and Mr. Obama signed it into law earlier this week.

Overall, though, Democrats have had a difficult time both in getting their jobs agenda passed and in connecting with voters, who are concerned about the unemployment rate, which ticked up to 9.6 percent last month.

In the run-up to Tuesday’s vote, Democrats blamed Republicans for blocking many of their attempts to address the joblessness issue.

“We’re in a situation now where too many colleagues seem to be rooting for failure,” said Sen. Debbie Stabenow, Michigan Democrat, who was one of the leaders in the push for the bill to stop jobs being shipped overseas.

Sen. Bob Casey, Pennsylvania Democrat, said he “can’t think of a single big idea [Republicans] have offered to create jobs.”

On the tax cuts, the split among Democrats runs deep, and has left the party’s congressional leadership with no choice but to put off until after the elections a vote on what to do about the expiring rates from the two rounds of tax cuts passed under Mr. Bush.

In 2001 income tax rates were lowered across the board and in 2003 the capital-gains tax was dropped from 20 percent to 15 percent, and the tax on dividend income was set at the same level. Previously, dividends had been taxed as personal income, with top rates nearing 40 percent.

But under the rules Republicans used to pass their tax cuts, all of the breaks are slated to expire at the end of this year.

Mr. Obama has called for extending all the cuts for individuals making less than $200,000 a year and couples who earn less than $250,000, but wants the income and investment tax rates for wealthier taxpayers to revert to their old, higher levels.

The 10-year cost of Mr. Obama’s plan is $3 trillion, while extending all the rates would cost another $700 billion.

The nearly four dozen House Democrats, in their letter, proposed a middle ground of extending the investment rates.

Mrs. Pelosi was silent on the lawmakers’ specific call, though her spokesman repeated their pledge to work on the middle-class tax rates.

“The speaker has stated clearly that Congress will extend middle-class tax cuts this year. There is no question that Congress will do so,” said spokesman Nadeam Elshami.

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