WASHINGTON (MNI) – The following are items of interest Tuesday
relating to the pending congressional vote on whether to extend Bush era
tax cuts and to the deficit:

* All eyes Tuesday are on the midday Democratic caucus lunch
meeting on the U.S. Senate side after Majority Leader Harry Reid’s
noncommittal reaction to the tax-cut deal announced Monday night. His
spokesman said only, “Now that the president has outlined his proposal,
Senator Reid plans on discussing it with his caucus tomorrow.” Reid, in
a Senate floor speech Monday, had given no hint he was ready to swallow
any Republican victory on tax cuts.

* President Obama said he was doing the right thing for the country
by going against Democratic political instincts to try to deny
Republicans an extension of Bush era tax cuts for high-income taxpayers
as well as the middle class. Many Democratic analysts took note, saying
Obama should have at least given Democrats credit for trying to fight
GOP imperatives before announcing an agreement with Republicans.

* Said Obama, “We saw that in two different votes in the Senate
that were taken this weekend. And without a willingness to give on both
sides, there’s no reason to believe that this stalemate won’t continue
well into next year. This would be a chilling prospect for the American
people whose taxes are currently scheduled to go up on January 1st
because of arrangements that were made back in 2001 and 2003 under the
Bush tax cuts. I am not willing to let that happen. I know there’s some
people in my own party and in the other party who would rather prolong
this battle, even if we can’t reach a compromise. But I’m not willing
to let working families across this country become collateral damage for
political warfare here in Washington. And I’m not willing to let our
economy slip backwards just as we’re pulling ourselves out of this
devastating recession.”

* The tax-cut deal between the White House and Republicans turned
out to be much broader than rumored beforehand, including not only
income taxes, but a partial continuation of an estate-tax cut, a
13-month extension of special unemployment benefits, a 2 point cut in
payroll taxes, like the income tax cuts, for two years. Also preserved
are the Earned Income Tax Credit, the Child Tax Credit and the education
American Opportunity Tax Credit subsidy for college tuitions. Business
writeoffs for investments will last a year.

* Despite the sometimes outright revulsion being expressed by many
Democrats on Capitol Hill at the relatively rapid agreement reached
between President Obama and Republicans on tax cut extensions, early
indications were that if Republicans are ready to vote for it,
sufficient majorities can be mustered for passage in the next week.
However, a filibuster in the Senate, by either a Republican or
Democratic opponent, could delay passage but, say analysts, probably not
indefinitely.

* The cost of the tax cut deal may be as much as $700 billion, none
of it offset by savings elsewhere — less than a week past many
congressional expressions of support for the National Commission on
Fiscal Responsibility’s deficit cutting plan. That raised the question
whether there could be another vote pending on the deal, that of the
global bond vigilantes who are currently concentrating on Ireland,
Portugal and Spain. So far Treasuries have stabilized at the days lows
after early selling with the cash 10-year yield at 3.02%.

** Market News International Washington Bureau: 202-371-2121 **

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