Today's Power Play: Tax Standoff Shifts to Senate

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The Day in Quotes - Tax Standoff Continues; Jobs Numbers Bring Relief, Not Optimism; Obama's Union Pick Sinks Debt Plan; Concerns Grow on DADT; Waters Faces Worse than Rangel's Embarrassment

"I'm trying to catch my breath so I don't refer to this maneuver going on today as chicken crap, alright? But this is nonsense. Alright? The election was one month ago. We're 23 months from the next election and the political games have already started, trying to set up the next election."

-- House Speaker Designee John Boehner (R-OH) talking to reporters about a Democratic lame-duck vote to extend current tax rates to only those making less than $250,000.

Is a deal on tax rates close at hand or are negotiations about to fall apart? The clucking and preening we see today in the elaborate mating ritual of that rare bird of compromise will likely tell us.

The House on Thursday passed a symbolic tax increase for upper earners. This was done to the exclusion of Republicans, who wanted to offer their own plans and even the dissenting Democrats to modify the package.

Consider this a farewell raspberry from outgoing Speaker Nancy Pelosi.

By pushing through the tax hike she successfully passed every controversial bit of the Obama agenda - health care with a government-run insurance provider, global-warming fees for carbon emissions and a tax increase - when the Democratic supermajority in the Senate could not and probably sometimes when President Obama would have preferred she didn't.

The tax increase is a dead letter in the Senate, where a bipartisan majority opposes any tax increase. But neither the blockers nor the hikers seem to have the 60 votes needed to overcome a certain filibuster.

Senate Majority Leader Harry Reid has set two tax votes for Saturday, one on the House plan and another on a compromise proposal from Sens. Max Baucus (D-MT) and Chuck Schumer (D-NY) that would increase the level for the hike to the rarefied air of those earning over $1 million a year. The House plan vote is only a symbolic sop to Senate liberals, while the million-dollar proposal seems to have some rustlings of support.

The main gainsay to the Baucus-Schumer proposal is that while it sounds better to increase taxes on fewer, richer people, the increase would actually concentrate the pain among employers, while leaving well-paid workers largely alone.

It was not taken as a good sign on Capitol Hill when the gang of four lawmakers picked by party leaders to hash out a tax compromise with Treasury Secretary Tim Geithner and Obama budget boss Jack Lew cancelled their session for today, citing a desire to see how the Senate votes on the two proposals.

But the real issue that has to be worked out is what other giblets can be stuffed back into the tax turkey. The most likely item to be attached to the tax package is the $140 billion package sought by the White House that includes $56 billion to extend unemployment benefits for another year.

Since the White House discounts the Republican argument that increasing taxes on the wealthy might actually decrease, rather than increase revenue, administration flak throwers are devoted to a line of argument that holds that Republicans don't mind deficit spending to cover tax breaks for the rich but not relief for the poor.

What the negotiators will be doing today instead of negotiating will be watching how the most predictable weather vanes in the Senate turn. Geithner and Lew will huddle with Vice President Biden, a Senate horse trader from way back, to talk strategy this morning.

Watch today for signs that moderate Republicans, especially the three New England GOPers and retiring Ohioan George Voinovich, are coming around to a big deficit spending bundle. Conversely, watch for signs from Democrats like Mark Warner of Virginia and Evan Bayh of Indiana that they can't go for any more spending.

And remember, whatever the Senate coughs up on taxes still has to go back to the House, which we've already seen is not a place hospitable to concessionary impulses in the Gotterdammerung of the Democratic majority.

"9.8%"

-- November unemployment rate as estimated by the U.S. Department of Labor.

A bitter disappointment for the White House as  job growth in November falls short of economists' forecasts, sending the national the unemployment rate upward to the highest level since April.

With an anemic 39,000 jobs created in November, rather than the 150,00 predicted by leading economists, it's not the kind of recovery the president needs to right his foundering political fortunes.

The numbers reaffirm concerns of a double-dip recession, but also reinforce the worry that even with the government and Federal Reserve dumping barge-loads of cheap cash into the economy, the best that they're able to do is keep America out of a commercial coma.

The jobs numbers, of course, will also play into the brinksmanship on the soon-to-expire tax rates. Democrats will accuse Republicans of callousness in the face of the worst period of high, sustained unemployment since the 1930s while Republicans will say Democratic insistence on a tax hike is sewing fear and uncertainty among would-be employers.

But the big problem here is for President Obama. Another month of recessionary unemployment figures will be a reminder that the kind of recovery currently underway - sort of a smooth jazz riff compared to the hard bop exuberance of the 1984 and 1996 rallies - would likely leave Obama himself unemployed in 2013.

The question that reins supreme in Washington now is whether Obama actually believes in his economic policies and is willing to stick with demand-side economics. Bill Clinton embraced free markets following his 1994 electoral defeat, but Obama hasn't yet shown how he will react to his fresh coat of shellac.

"Nonetheless, I support this plan, warts and all, because it sends a critical message to the American people, financial markets and the international community that the U.S. government is finally ready to act seriously, decisively and responsibly about our short and long-term fiscal crisis."

-- Op-ed by Sen. Judd Gregg (R-NH) in the Washington Post endorsing the plan put forward by the co-chairmen of the president's debt reduction commission, Alan Simpson and Erskine Bowles.

Members of the Simpson-Bowles debt commission will defeat an ambitious proposal of deep cuts and closed tax exemptions from their chairmen today. Word that one of President Obama's picks, former SEIU boss Andy Stern, will oppose the plan effectively kills the proposal.

If 14 of the 18 members cast their votes in favor of the plan, it has been guaranteed a vote in the Senate. That has always seemed like an unlikely outcome, but what is surprising here is how many yes votes there seem to be.

The latest media reports and public statements from members show:

10 Yeas

SimpsonBowles Gregg Sen. Tom Coburn (R-OK)Sen. Mike Crapo (R-ID)Sen. Richard Durbin (D-IL)Sen. Kent Conrad (D-ND)Alice Rivlin (former Clinton budget boss and Federal Reserve vice chairwoman)Dave Cote (CEO of Honeywell International)Ann M. Fudge (former CEO Young & Rubicam Brands)

5 Nays

SternRep. Paul Ryan (R-WI)Rep. Dave Camp (R-MI)Rep. Jan Schakowsky (D-IL)Sen. Max Baucus (D-MT)

3 Undeclared

Rep. John Spratt (D-SC)Rep. Xavier Becerra (D-CA)Rep. Jeb Hensarling (R-TX)

The takeaway is that there is a surprisingly strong appetite for tough measures on debt reduction. The assent of Coburn and Crapo, two staunch conservatives, to a plan that features tax increases and the backing of Durbin, an avowed liberal, to a plan that includes entitlement reductions took many in Washington by surprise.

But once out of the rarified air of the special commission and in to acrid environment of Congress, how long can the consensus lasts.

"They can't just up and leave. They have enlistment contracts."

-- Defense Secretary Robert Gates responding to a question from Sen. John McCain (R-AZ) about the 21 percent of Army combat forces and one third of all combat Marines who responded to a survey on the repeal of "Don't Ask, Don't Tell" by saying said they would leave the service earlier than previously planned if the policy was scrapped.

After hearing a throaty defense from Joint Chiefs Chairman Mike Mullen and Defense Secretary Robert Gates about an administration plan to allow gays in the military to openly express their sexualities, it's time for the heads of the individual branches to offer their assessments of the proposal.

And moving one step closer to the ranks may reveal a less sanguine attitude about the adaptability of combat troops to having their gay comrades living out loud.

A major concern expressed by McCain and many in the military will be holding on to the non-commissioned officers who make up the backbone of America's fighting forces. If sergeants begin retiring early because they don't want to be dragged into gender identity disputes and a whole new world of sexual harassment concerns, it could be a heavy tax on the defense apparatus.

The administration argues that the Pentagon can soften the blow through sound policies so that by the time gay troops are expressing themselves, NCOs and junior officers will have the tools they need to deal with whatever might arise.

There's a good chance that a less optimistic projection will arise today, particularly from Marine Commandant Amos.

Those assessments and the increasing understanding that the strongest opposition to repealing the current policy of silent obliviousness comes from combat forces - 60 percent of which opposed the change in a Pentagon survey - may make it difficult to jam through the proposal in the lame duck session.

"I don't deal with average American citizens. Citizens are diverse and broad I don't know what is average."

-- Rep. Charles Rangel (D-NY) when asked whether his censure, a public chiding for ethical misdeeds, was a much kinder fate than an average citizen might have suffered for problems related to reporting taxable income.

It was a sad spectacle as 40-year House veteran Charlie Rangel took his censure in the well of the House. While Rangel was a pitiable figure in his doleful expressions, he was not exactly filled with remorse.

While he regretted putting his colleagues in that "awkward" position, he argued that he was a victim of political shenanigans and that his infractions, including failing to report outside income from a Dominican villa and squeezing donations to a center named in his honor from the companies he regulated as head of the Ways and Means Committee, were not as bad as if he had "curse[d] out the speaker," "tried to have sex with minors" or stolen money.

Rangel will keep his pension, his perks and his seniority as he continues to serve in the House. It was a symbolic humiliation, to be sure, but only that.

The real action will be one the case of Rep. Maxine Waters (D-CA) who is accused of helping to steer a $50 million bailout to a bank partly owned by her husband.

Democrats acted quickly to deal with the case against the much beloved Rangel on the comparatively minor charges against him in the lame duck session. Waters, who is not a popular figure in Congress the way Rangel is, will be left to the ministrations of the incoming Republican majority.

The charges against Waters are much more serious and she has shown none of the halting contrition exhibited by Rangel. While Rangel's worst-case scenario was a public scolding, Waters faces expulsion if she is found to have enriched her family by use of her influence.

Watch for the battle over her fate as Republicans ascend to power.

And Now, A Word From Charles

"That same arrogance which caused him to commit all these sins is the one that had him turn down a simple reprimand, which he could have had, and suffer the censure, which is a true humiliation and a disgrace."

-- Charles Krauthammer discussing Rep. Charlie Rangel (D-NY) on "Special Report with Bret Baier."

VIDEO: Krauthammer: Rangel Undone by Arrogance