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

* Wednesday dawned with various Capitol Hill Democrats trying to
organize continuing protests of President Obama’s tax-cut deal with
Republicans without much evidence Democratic congressional leaders were
resigning themselves to acquiescence just yet.

* Senate Majority Leader Harry Reid Wednesday said not a “great
deal” more work is left to do on drafting the tax bill, adding that the
tax package is “further along” than most realize.

* President Obama will take questions from reporters along with
Polish President Bronislaw Komorowski later in the day, an opportunity
for questioners to ask the president’s reaction to continuing
noncommittal responses by congressional leaders to his urgings to accept
the tax cut deal.

* Stalwart liberal columnists seemed as disgruntled as Democrats on
Capitol Hill in reacting to the tax cut deal. The New York Times’ Paul
Krugman called the deal “enormously self indulgent” for the president in
a PBS appearance. Washington Post columnist Steve Pearlstein sketched an
alternate scenario in which President Obama should stand by on Capitol
Hill ready to sign a middle-class tax cut while Republicans filibuster
to more sharply define Democratic differences with Republicans. He said
the president should have let tax rates go up temporarily Jan. 1 and
then negotiate the same deal with the new Congress.

* A few conservative Republicans are withholding their support for
the tax cut deal the Republican leadership negotiated with President
Obama, adding another complication to the preliminary vote counting.
Sen. Jim DeMint, seen as the experienced godfather to Tea Party
activists setting up their new Capitol Hill offices, told a conservative
talk show host Hugh Hewitt, “We don’t need a temporary economy, which
means we don’t need a temporary tax rate.” DeMint said that even though
the increase in the estate tax is slowed down by the deal, it’s still an
increase, that unemployment benefits should be in the form of loans and
that overall, negotiations over tax cuts ended prematurely.

* Members of Congress scanning the news clips for guidance are
seeing some mixed signals rather than any sudden outpouring of praise
for the tax-cut deal from either end of the income spectrum. From the
heart of Silicon Valley, where beneficiaries of two-year extension of
research and development credits and the equipment investment write-off
abound, The San Jose Mercury newspaper found local tech leaders in a
welcoming mood, though disappointed the payroll tax cut doesn’t apply to
employers. And for one unemployed tech worker who could see $267 a week
benefits extended, an expression of worry about the national debt.

* Firms selling tax preparation software as well as the IRS itself
are waiting for the signal to modify their products, forms and
withholding tables. The working hypothesis is that Capitol Hill will be
taking the final votes on the proposal in one week, wrapping up on a
Thursday. But the legislative schedule, in place while negotiations were
under way, appears less firm now that negotiations have stopped and as
Democratic leaders who control the vote timing still listening to their
members sound off about the deal.

* Viewing the tax cut deal and all its features as a sizable
stimulus, analysts keep upgrading the medium-term economic outlook, with
Goldman Sachs Wednesday saying that “makes it a closer call that the Fed
extends asset purchases” beyond the middle of next year “and implies a
slightly earlier onset of tightening.”

* The key audience watching the tax-cut discussion from afar, the
credit markets, appeared to reflect some skepticism Wednesday as
Treasury prices fell and yields moved sharply higher to June levels.
Just the part of the deal that cuts the payroll tax by 2 percentage
points for two years would cost about half a trillion dollars. The U.S.
Treasury sells $21 billion in 9-year 11-month notes at 1 p.m. EST.

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

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