WH warns tax defeat could trigger new recession

WH warns tax defeat could trigger new recession

President Barack Obama, joined at left by Secretary of State Hillary Rodham Clinton, meets with his Cabinet, Wednesday, Dec. 8, 2010, at the White House in Washington.

WASHINGTON (AP) -- Raising the direst alarm yet, the Obama administration warned fellow Democrats on Wednesday that if they defeat the big tax-cut compromise detested by many liberals, they could jolt the nation back into recession.

President Barack Obama appealed anew for Congress to "get this done" and insisted that more congressional Democrats would climb aboard as they studied details of the $900 billion year-end measure. Several did announce support on Wednesday, but at least one said there still was "a mood to resist."

One Democratic opponent, Rep. Barney Frank of Massachusetts, forecast a result that would abruptly reverse Congress' voting pattern of the first two years of Obama's term: "It will be passed by virtually all the Republicans and a minority of Democrats." He said he would vote against it.

Larry Summers, Obama's chief economic adviser, told reporters that if the measure isn't passed soon, it will "materially increase the risk the economy would stall out and we would have a double-dip" recession. That put the White House in the unusual position of warning its own party's lawmakers they could be to blame for calamitous consequences if they go against the president.

With many House and Senate Republicans signaling their approval of the tax cut plan, the White House's comments were aimed mainly at House Democrats who feel Obama went too far in yielding to Republicans' demands for continued income tax cuts and lower estate taxes for the wealthy.

Obama says the compromise was necessary because Republicans were prepared to let everyone's taxes rise and to block the extension of unemployment benefits for jobless Americans if they didn't get much of what they wanted.

Economists say the recent recession officially ended in June 2009. But with unemployment at 9.8 percent, millions remain out of work or fearful of losing ground economically, and the notion of the nation falling back into a recession would strike many as chilling. It also could rattle markets and investors.

The deal Obama crafted with Senate Republican leaders would prevent the scheduled Dec. 31 expiration of all the Bush administration's tax cuts enacted in 2001 and 2003, even though Obama had often promised to end the cuts for the highest earners.

Summers' remarks contrasted with Obama's comments at a news conference Tuesday. "We don't have the danger of a double-dip recession," the president said then, noting the impact of the 2009 stimulus bill and other measures meant to steady the economy.

Obama again urged unhappy Democrats to swallow the compromise, and denied that he went overboard to appease Republicans. "I think it is inaccurate to characterize Democrats, writ large, as quote-unquote betrayed," he said Wednesday.

He said a number of Democrats "have said this makes sense. And I think the more they look at it, the more of them are going to say this makes sense."

Three straight days of multi-pronged White House efforts to weaken Democrats' resistance did appear to start having the desired effect.

"In my opinion, a strong leader is one who knows when to compromise," said Rep. Michael E. McMahon, D-N.Y., in announcing his support for the plan.

Frank, still an opponent, said Democrats under House Speaker Nancy Pelosi do not subscribe to former GOP Speaker Dennis Hastert's policy of passing major bills only if most of his party's members supported them. Such a stance, which essentially renders the minority party irrelevant, "is very antidemocratic, hyperpartisan," Frank said.

House Democrats, who will lose their majority in January, still hold a 255-179 edge in the current Congress. To pass a big bill with mostly Republican votes would mark a dramatic departure from recent battles, such as the health care overhaul, which was enacted with virtually no GOP support in either chamber.

Pelosi and other House Democratic leaders continued to remain outwardly neutral to the tax cut compromise, criticizing some aspects but stopping short of urging or predicting its demise.

For a second straight day Wednesday, Vice President Joe Biden traveled to the Capitol to meet privately with Democrats - this time in the House, after visiting senators on Tuesday. Aides distributed a color-coded chart labeled "what we got," and "what they got," indicating that Democrats won more concessions in the tax deal than did Republicans.

House Majority Leader Steny Hoyer, D-Md., said he still had reservations about the package, indicating he hopes changes are made before the Senate acts.

"We'll see what the Senate passes," Hoyer said.

Biden took a tough stance, warning that any changes might unravel the compromise plan, said several House Democrats who attended the meeting. "The vice president said, 'this is the deal, take it or leave it,'" said Rep. Henry Waxman, D-Calif.

The White House ballyhooed almost any elected Democrat who endorsed the tax plan, with no state or city too small to justify a press release. Vermont Gov. Jim Douglas and Charlotte, N.C., Mayor Anthony Foxx were among those praising the plan, the White House announced.

But many House Democrats were unmoved. They particularly criticized Obama's proposed estate tax rates, which are far more generous than most Democrats had expected. The concession seemed gratuitous, said Rep. David Price, D-N.C. For now, he said, "there's a mood to resist" the overall package.

Also, a co-leader of Obama's deficit-reduction commission said he was deeply disappointed that the tax agreement includes no firm commitment for long-term federal fiscal restraint. Erskine Bowles, a chief of staff in the Clinton White House, made the remarks at a Wyoming event.

Passage of Obama's plan seems more assured in the Senate, where numerous Democrats have agreed that the president had little choice in making the compromise with Republicans. Still, Majority Leader Harry Reid, D-Nev., said he and colleagues are considering possible changes, and action could come within days.

Changes designed to ease some Democrats' concerns might include a provision for bonds to help state and local governments pay for construction projects, tax breaks for wind power and clean-energy subsidies, lawmakers said.