–First Week Of Lame Duck Focuses On Party Elections, Elec Post Mortems
–President Obama To Meet With Hill Leaders Tuesday
–Senate Majority Leader Outlines Possible Tax-Cut Votes
–Congress Bracing For Likely Three-Week Session To Finish Business
–Bowles-Simpson Deficit Panel Faces Dec. 1 Deadline For Report

By John Shaw

WASHINGTON (MNI) – While little legislative activity occurred
during the first week of the Lame Duck session, lawmakers return
to Washington on Monday hoping that progress will be made on tax-cut
and spending issues.

Congressional leaders have not yet laid out the full schedule for
the rest of the Lame Duck session, but lawmakers have said they expect
to be in session for three weeks, perhaps concluding by Dec. 17.

But there are a lot of issues still on the table, including taxes,
spending, immigration, the START treaty and a possible vote on ending
the ban on gays in the military.

On the tax-cut front, Senate Majority Leader Harry Reid said last
week that he wants the Senate to hold “some votes” on alternative
tax-cut packages when Congress reconvenes after Thanksgiving.

Reid said Senate Democrats continue to support extending the Bush
era tax cuts for those individuals making $200,000 or less and couples
making $250,000 or less. He said he is not certain if the Democratic
plan would extend these tax cuts permanently or for a shorter
time.

Reid said he would like to schedule Senate votes on the Democratic
plan and the Republican alternative which would extend all the Bush era
tax cuts, including those for higher income people.

The Senate Republican plan would cost $4 trillion over a decade,
while the Senate Democratic plan would cost about $3.2 trillion over the
same period.

House Democratic leaders, who will retain their majority in the
Lame Duck session, also support extending the middle-class portion of
the Bush era tax cuts.

President Obama has been sending signals since the mid-term
elections that he is willing to back down from his long-held position
that the Bush tax cuts be extended only for those individuals making
$200,000 or less and couples making $250,000 or less.

Incoming House Speaker John Boehner and Senate Minority Leader
Mitch McConnell repeated last week that all Bush era tax cuts should be
extended.

Earlier this year, Boehner suggested all the Bush era tax cuts be
extended for two years and that discretionary spending be cut back to
2008 levels. But since the election Boehner has taken a harder line,
saying all the Bush tax cuts should be extended permanently.

Some congressional Democrats have floated another idea: extending
the so-called middle class tax cuts permanently, but extending those for
upper income earners for a year or two.

The fate of Bush era tax cuts is expected to be prominent on the
agenda when Obama meets with congressional leaders next Tuesday.

Also expected on the agenda is the fate of an expiring spending
bill that is funding the government while work continues of the 12
regular spending bills for the 2011 fiscal year.

The stop-gap spending bill expires Dec. 3 and efforts to draft a $1
trillion omnibus spending bill to fund the government through the rest
of FY’11 is now being opposed by McConnell.

Congress is expected to pass another stop-gap spending bill next
week that funds the government probably until February.

As Congress works on its agenda, the National Commission on Fiscal
Responsibility and Reform will meet in an attempt to reach agreement on
a plan in a week, by its Dec. 1 deadline.

The two chairmen of the panel, former Sen. Alan Simpson and
former White House Chief of Staff Erskine Bowles, are revising a
discussion draft they released about two weeks ago.

President Obama created the Commission on Feb. 18 by executive
order after an attempt by lawmakers to create a panel by statute failed
in the Senate.

The commission is charged to issue a report by Dec. 1 that would
cut the deficit to about 3% of gross domestic product by fiscal year
2015 and begin slowing the growth of debt over the long term. In order
for the panel to issue recommendations, 14 of the 18 members need to
reach an agreement.

The draft budget plan Simpson and Bowles released earlier calls for
more than $4 trillion in budget savings over a decade.

Their draft plan would bring the federal budget deficit down to
2.2% of gross domestic product by 2015. It would reduce the nation’s
debt to 60% of GDP by 2024 and to 40% of GDP by 2037.

The plan would wring deep savings out of every corner of the
federal budget, including defense and Social Security.

The Bowles-Simpson plan would put in place tough discretionary
spending caps that would help achieve about $1.4 trillion in savings. It
calls for $733 billion in entitlement savings and $751 billion in
savings from overhauling tax expenditures over a decade.

The plan calls for fiscal changes that would bring federal spending
down to about 21% of GDP and boost revenues to bring them up to 21% of
GDP. The plan would balance the federal budget by 2037.

In their draft, Bowles and Simpson call for fundamental tax reform
in which the marginal rates are reduced, the tax base is broadened, and
revenue is capped at 21% of GDP.

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

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