Today's Power Play - The Left Gets Riled Over Tax Deal

Chris Stirewalt's Power Play is available for a limited time on the America's Election HQ blog. Check back for updates on new subscription offers for app users. 

Power Play - The Left Gets Riled Over Tax Deal; Wikileaks Dims Hope for Iran Talks; Korea on the Brink; Fed Pay Freeze Doesn't Cut Much Ice; $3 Trillion Bailout Ahead?

"We're moving in that direction. And we're only moving there against my judgment."

-- Sen. Dick Durbin (D-IL) when asked on "Face the Nation" about a proposal to extend current tax rates for all income levels for two more years.

The caterwauling over the current tax debate suggests that Democrats are having a very hard time adjusting to the loss of their supermajority status in Washington.

President Obama is edging closer and closer to the idea of a compromise on a plan to extend the Bush-era tax rates for all income levels in exchange for a $140 billion Democratic package that includes spending on extended unemployment benefits and money to send "refund" checks to those who do not pay taxes.

And the plan has to move fast. In order to even schedule votes on other administration agenda items - a nuclear treaty with Russia, a limited amnesty program for illegal aliens, allowing gay members of the military to openly express their sexualities, etc. - the tax issue has to be resolved by Wednesday.

Expect to see the president lay out the importance of the compromise in his visit to a North Carolina community college today.

This is a better deal than Democrats might have hoped for. The spending part of the deal is large and extension of the current tax rates is temporary. With five Senate Democrats voting over the weekend against an extension limited to lower income brackets, such a plan might even be considered something of a coup for liberals.

Obama and the Democratic negotiators have convinced Republicans that no full extension of the Bush-era rates can pass the House without the welfare program funding attached. Notch another victory for outgoing House Speaker Nancy Pelosi.

But the deal has drawn bitter denunciations on the left. We heard last week from Sen. Tom Harkin of Iowa that if Obama cuts a deal on the Bush tax rates it will crush his liberal supporters and that his only hope for reelection would be if Sarah Palin is the Republican nominee, a rather stinging rebuke in liberal circles.

Paul Krugman's column today, "Let's Not Make a Deal," says that President Obama should back away from the table and let tax rates go up across the board whilst denouncing Republicans. Here, Krugman engages in one of the most politically dangerous habits of the president's base - unrealistic expectations.

No politician is so gifted, no speaker so orotund as to be able to sell the outcome Krugman, Harkin and others propose.

The president cannot pass the bill he wants -- a plan to hold rates for middle-class payers down while hiking rates for upper incomes -- nor can he pass an extension of unemployment benefits and other items that he identifies as both relief and stimulus without Republican votes.

What's more, there are other year-end items that have to get through on the revenues side. Congress must act to prevent the Alternative Minimum Tax from kicking back in and prevent the expiration of Obama's payroll tax cut that came as part of the stimulus. Plus, if Congress doesn't act, the estate tax, which lapsed this year, would return at a rate of 55 percent for inheritances worth $1 million or more.

Blowing off negotiations at this point would be a signal to Republicans to sit out the rest of the year and wait for the next Congress to convene.

Not even the Obama of 2008 could explain to Americans that tax rates are going up for everyone, the unemployed are getting kicked off the rolls and family farms are getting sold to pay taxes all to punish Republicans for being stubborn. And the split-lipped, politically battered Obama of 2010 certainly cannot.

It remains to be seen how long it will take liberal Democrats to be reconciled to the idea of a divided Washington and manage their expectations accordingly. But it is clear that if they do not like how things are going in the lame duck, they're really going to hate it when they lose their House majority.

"... donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide."

-- Secret diplomatic cable from Secretary of State Hillary Clinton released by Wikileaks.

As America heads back to the negotiating table with Iran today, the ongoing damage from the leak of a trove of secret State Department cables comes into clear relief.

The latest batch of the mega document dump sifted through by the New York Times reveals some rather unflattering assessments of the Arab states on which we are relying to create a Diplomatic perimeter around Iran.

For its part, Iran got warmed up for the resumption of direct negotiations with the U.S. and our regional allies by touting its production of "yellowcake" enriched uranium (and just in time for the release of the Valerie Plame movie, too).

While Iran's boasting of bomb-making potential ahead of the talks might stiffen U.S. spines about the need to back down the regime in Tehran, it will likely have the opposite effect on those within missile-range of Tehran. If the Mullahs are going to have the bomb anyway, what's the sense in being hostile?

Further complicating American efforts to deny the mullahs a nuke are the diplomatic cables that recount obstruction, willful ignorance and even banditry in the Arab world when it comes to funding the terror masters.

The general sense is that the Saudis, Qataris and others in the oil-soaked parts of the region have resumed funding the groups that fund the groups that train and equip the terrorists.

Seeing these frank assessments of the failure of our Muslim allies to address the ways in which their citizens are funding al Qaeda will not encourage the team spirit U.S. negotiators say is necessary to isolate Tehran.

If it's any solace, though, most foreign policy experts seem to think that the talks are a waste of time anyway.

"We'll respond to the North's preemptive attack by invoking the right of self-defense, and I've already given that order. We'll continue counterattacks until the North surrenders. That's the bottom line."

-- South Korean Defense Minister Kim Kwan-jin talking to reporters.

Facing political pressure at home and little hope for direct intervention abroad, South Korea's government is looking for a show of strength against North Korea.

Still reeling for botched intelligence over the deadly shelling of islands off the two countries' coasts (spies knew of the attack but didn't warn of it because they assumed it was routine NorK bluster), South Korea is conducting live-fire artillery drills in the disputed region.

This is generally how these Korean conflagrations start. A shell veers into disputed waters and, pretty soon, it's on. By conducting large-scale maneuvers with live ammunition in the disputed territories, South Korea seems determined to provoke the North again. To save face? To show the dangers of the Pyongyang regime? Who knows?

But what is clear is that China will not be wading into the fray anytime soon. The closest the Obama administration could get to drawing China into a round of negotiations being hosted by Secretary of State Hillary Clinton today was a brief phone call between the president and Chinese Premier Hu to discuss why peace is better than war.

"$2.5 billion"

-- The value of raises to federal workers over the next two years under the terms of President Obama's federal "pay freeze."

Congress is expected this week to approve a proposal from the administration to "freeze" the salaries of federal workers.

But a new analysis of the plan by Federal Times says that while the freeze would eliminate across-the-board, cost-of-living bumps, so-called "step increases" would be untouched for some 1.1 million federal employees.

These raises are based on seniority and are automatic increases of between 2.6 percent and 3.3 percent.

The revelation comes as the administration calls for the most meager pay increase for military personnel since 1962. Service members are up in arms over the proposed 1.4 percent hike requested by the administration.

With $2.5 billion for federal workers and new money for welfare programs, military members are up in arms over the stingy sum that is part of an Obama austerity plan. Coupled with the push on Don't Ask Don't Tell, this could mean trouble in the ranks.

"The point of this is to smoke the rats out of their holes. What is the total amount of pension debt? No one really knows."

-- Rep. Devin Nunes (R-CA), sponsor of a bill to require state and local governments to disclose the details of their pension funds, interviewed by the Wall Street Journal.

Economists warn that there could be a $3 trillion bailout bomb in America's government pension funds, and incoming House Republicans are looking for a way to diffuse it.

Reps. Devin Nunes (R-CA), Paul Ryan (R-WI) and Darrell Issa (R-CA) want to force pension funds to disclose their assets and liabilities under the Freedom of Information Act as part of a preemptive effort to head off potential bailouts.

The danger is that bad investments in places like California and New York, where political mischief in selecting investments has been alleged, could leave states unable to fund their lavish obligations to retirees.

Nunes, Ryan and Issa are suggesting that governments that want the right to float bonds in order to borrow money ought to have to disclose their books.

It sounds like dry stuff, but put this in your future file. The fight will draw in not just the government unions that benefit from the pensions but the politicians who have helped steer big public money into questionable investments with supporters and patrons.

Thanks to today's Power Play crew: Wes Barrett, April Girouard, L.A. Holmes, Heidi Noonan, and Whitney Ksiazek