The delay in a White House summit between Barack Obama and congressional leaders has raised questions about the prospects for a compromise on the extension of Bush-era tax cuts.
The meeting, which was originally called for Thursday, has been moved to November 30, following a request from John Boehner and Mitch McConnell, Republican leaders in Congress, who are emboldened by their party’s victories in the midterm elections.
Although the Republican leaders asked for the postponement because of “scheduling conflicts”, the move reflects the distance that still exists between them and Democrats over the contentious tax measures, despite a widespread belief in Washington that ultimately a compromise will be reached.
On Wednesday, Robert Gibbs, White House press secretary, sought to defuse concerns that a deal on the tax cuts would not be reached in the “lame duck” session of Congress, which would cause tax rates to increase for all Americans on January 1 and threaten the economic recovery. “There is a strong impetus to get something done by the end of the year,” Mr Gibbs told reporters.
But earlier in the day Mr McConnell, Senate minority leader, had staked out a tough position on the Bush-era tax cuts in a speech on the floor of the upper chamber.
He specifically mentioned trade, clean coal, nuclear energy and spending as likely areas of compromise at the November 30 meeting, but not the tax cuts.
Instead, referring to his party’s aim to extend the Bush tax cuts permanently for all income categories, he said it was “safe to say that the American people clearly preferred our proposal”.
Mr McConnell added: “It is my hope that, starting today, Democrats will turn to priorities that reflect the priorities of the American people. If they choose that route, I know Republicans will be happy to work together to get them done. If not, I’m confident Republicans will be eager to chart a different course on behalf of the American people.”
Republicans have been growing nervous in recent days.
They are concerned that Democrats and the White House will try to stand firm in their wish to “decouple” the treatment of the Bush tax cut extension for the wealthiest Americans from those earning less than $250,000 a year, instead of accepting a deal that would see tax rates extended for all income categories for two or three years.
On Tuesday Dave Camp, the Michigan Republican who will chair the House Ways and Means committee next year, attacked decoupling as a “terrible idea and a total non-starter”.
But Nancy Pelosi, Democratic speaker of the House, has come under increasing pressure from the left wing of her party and union leaders not to back down on the tax cuts issue and will soon have to decide whether to move ahead with a vote that decouples the tax rates and, if so, what form the bill should take.
It could include a permanent extension for the middle class and expiry for the richest earners, as well as a temporary extension for the wealthy and a longer or permanent one for the middle class.
The threshold for expiry could also be lifted to a higher level such as $500,000 or $1m in conjunction with one of those scenarios.
Kevin Hassett, director of economic policy studies at the American Enterprise Institute, said “decoupling” would be viewed as a “declaration of war” by the right, since it would put Republicans in the very difficult political position of having to push for tax cuts only for wealthy Americans in the new Congress. Mr Hassett said this would throw a wrench into hopes for “bipartisan policy” over the next two years.
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