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House Democrats block GOP-Obama tax deal. Is it dead?

Many Democrats are angry with the GOP-Obama tax deal. They want to hold out for more GOP concessions. But the expectation is that the tax cuts will still pass, probably with some changes.

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Top economic adviser Larry Summers, who leaves the administration at the end of the year, warned on Wednesday that a failure to pass this deal – imperfect as it may be – could be highly damaging to the economy.

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"If they don't pass this bill in the next couple of weeks," Mr. Summers told reporters at a briefing, "it would materially increase the risk the economy would stall out and we would have a double dip [recession]."

For the Democrats, too, there are political reasons to get this deal finished as quickly as possible. In January, all the new members of Congress elected in November will take their seats on Capitol Hill, with the Republicans taking control of the House and adding to their caucus in the Senate, though not enough for a majority.

In a press conference Tuesday, Obama stated that he got the best deal he could, and that if the issue held over into January, the Republicans would be in an even stronger position. Some Republicans have expressed opposition to the current version of the plan, arguing that the Bush tax cuts should be made permanent across the board, including for the wealthy – a segment of the tax-paying public that includes some small businesses.

Deficit hawks are also unhappy with the tax-cut compromises, arguing that they add nearly $1 trillion to the national debt in the next two years. Just a week ago, the president’s bipartisan fiscal commission came out with a package of tough recommendations – both tax increases and spending cuts – and already, that feels like ancient history. None of the elements of the Obama-GOP package are paid for with offsetting cuts.

As much as objecting to the content of the deal, House Democrats are expressing insult that they weren’t consulted during the negotiations. They also believe Obama simply didn’t push hard for a better deal, and should have called the Republicans’ bluff on allowing middle-class tax cuts and unemployment benefits to expire on Dec. 31.

“Do you really think the Republicans are going to go home for Christmas having just taken families and devastated them,” Rep. Peter DeFazio (D) of Oregon, author of the resolution rejecting the tax deal, said Thursday, according to Politico. “I think they’re bluffing on unemployment, and if they want to do that, I want to have that fight and so do a lot of other Democrats.”

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