Obama, Congress Maneuver to Extend Unemployment Benefits in Exchange for Current Tax Rates

WASHINGTON -- After Senate Republicans, with the help of a few Democrats, refused to cave on extending tax rates for the wealthy next year, a deal to extend unemployment benefits in exchange for White House agreement on continuing everyone's current rate appears to be gaining traction.

Senate Republican leader Mitch McConnell said Sunday that it's clear to him taxes will not be raised for anyone next year -- and that unemployment compensation for those jobless beyond 99 weeks could be extended. McConnell did not say how long tax rates would be extended though unemployment compensation could last another year.

Sen. Jon Kyl, R-Ariz., speaking on CBS' "Face the Nation," suggested a deal would be for tax rates to last considerably longer than one year.

"I think that most folks believe that the recipe would include at least an extension of unemployment benefits for those who are unemployed, and an extension of all of the tax rates for all Americans for some period of time," Kyl said.

"It could happen. I'm not going to rule it out," added Sen. Dick Durbin, D-Ill., who appeared with Kyl.

But some liberal lawmakers, like Sen. John Kerry, D-Mass., said the GOP is "absolutely prepared to deny unemployment insurance" to people."

"They've said no, we're willing to hold that hostage so that we can give the wealthiest people in the country a bonus tax cut," Kerry said on NBC's "Meet the Press."

Sources told Fox News on Sunday that Obama is trying to "sell" liberals in the House on his potential acceptance of tax rates across the board and for the wealthy, potentially marrying the cuts to jobless benefits, and he wants a deal done this week. A senior House aide told Fox News to expect things "to accelerate quickly on Monday."

The news of a potential breakthrough came after the Senate on Saturday voted down efforts to limit any extension of the Bush-era tax cuts for the top-earning Americans.

But as lawmakers fret over a growing deficit, even the purported tight-fisted among them acknowledge they need to come up with $265 billion next year to pay for the jobless aid as well as the gap in budget estimates based on current rates and a hike in taxes next year.

Extending all the current rates would add $115 billion to deficit spending next year while extending jobless benefits for another year would cost $150 billion in unbudgeted spending. That number could grow to $800 billion over two years.

Sen. Kent Conrad, D-N.D., a member of Obama's deficit commission, told "Fox News Sunday" that short- and long-term priorities are different.

"In the short term, I think it's imperative that we extend the tax cuts, at least for the middle class, because the economic consequences of a failure to extend the tax cuts are severe," he said. "But that doesn't take away from the fact we then have to pivot and have a longer term plan to control the debt and bring it down.

Rep. Jeb Hensarling, R-Texas, who is also a member of the commission said he doesn't want rates to increase for anybody, but spending must come down

"We don't want no tax increases on nobody. Now, that may be poor grammar, but it's great economics," he said. "The cost of government has averaged 20 percent of the economy in the post-war era, and over the course of the next generation it's due to double."

Durbin added that any talk about extending tax rates should be coupled with discussions on raising the debt ceiling.

"I'm troubled. I know that in a few months we're going to have a debt ceiling vote ... and many of the people who are going to vote for this tax cut for the wealthiest people in America, adding to our deficit, lamenting that deficit, will refuse to vote on the debt ceiling out of principle," he said.