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Senate Republicans derailed legislation Saturday to extend expiring tax cuts at all but the highest income levels in a political showdown that paradoxically clears a path for a compromise with the White House on steps to boost the economy.
"We need to get this resolved and I'm confident we can do it,'' President Obama said shortly after the near party-line votes. The public must have "the peace of mind that their taxes will not go up'' on Jan. 1, he added.
Obama has signaled that he will bow to Republican demands for extending tax cuts at all income levels, and his remarks capped a day that lurched between political conflict and talk of compromise on an issue that played a leading role in last month's elections.
Democrats introduced two measures in the Senate to extend the tax cuts for all but the wealthiest Americans in an effort to showcase Republican lawmakers as defenders of millionaires and gain an edge for the 2012 elections.
Republicans dismissed the Democrats' maneuvers as the last gasp of a party that lost its majority in the House of Representatives in the Nov. 2 elections, surrendered several seats in the Senate and will be forced to share power beginning in January.
Republicans noted that unemployment rose to 9.8 percent last month and said it made no sense to raise taxes on anyone in a weak economy.
"It is the most astounding theory I have ever seen. Raise taxes to create jobs,'' said Sen. John Thune of South Dakota.
But Democrats accused Republicans of contributing to rising deficits while siding with the rich by rejecting proposals that would let tax cuts passed during George W. Bush's presidency lapse on seven-figure incomes.
"Do we want to extend those tax breaks for millionaires and billionaires at a time of huge deficits. I would argue vociferously we shouldn't,'' said Sen. Charles Schumer of New York.
But the rhetoric subsided quickly after the votes, and Senate leaders in both parties said they hoped political clashes would give way to compromise in the next several days.
Obama later spoke with Reid and House Speaker Nancy Pelosi. A White House official said the president told them he was open to a temporary extension of the tax cuts if the Democratic priorities were included in the deal.
Sen. Mitch McConnell, the Republican leader, said he was relatively confident there would be a deal with the White House "not to raise taxes in the middle of a recession.'' He said talks were continuing on the length of an extension to be enacted for the cuts that were put in place in 2001 and 2003.
Senate Majority Leader Harry Reid said he hoped for an agreement by the middle or end of next week on legislation that would combine an extension of tax cuts with a renewal of expiring jobless benefits for the long-term unemployed.
Officials have said that in addition to tax cuts and unemployment benefits, the White House wants to include renewal of several other tax provisions that are expiring. They include a break for lower- and middle- class wage earners, even if they don't make enough to pay taxes to the government, as well as for college students and for companies that hire the unemployed.
Key lawmakers and administration officials have been at work negotiating the terms of a possible deal for several days.
But many congressional Democrats privately have expressed anger at Obama for his willingness to surrender to Republican demands to let the tax cuts remain in place at upper incomes, and numerous officials said no compromise would be possible until they had engineered votes in both the House and Senate.
Any deal would mean a reversal for Obama, who said in the 2008 presidential race and this year that he wanted to let cuts expire above incomes of $200,000 for individuals and $250,000 for couples.
In the Senate, a bill to enact Obama's original position was blocked on a vote of 53-36, seven votes short of the 60 needed to advance the legislation over Republican delaying maneuvers. Republicans were unanimous in their opposition, and were joined by five members of the Democratic caucus.
The second measure would have kept the tax cuts in place on incomes below $1 million. It appeared crafted to appeal to senators from states with large high-income populations, as well as cast Republicans as protectors of the rich.
It was blocked on a vote of 53-37, also seven short of the 60 needed. A slightly different lineup of Democrats sided with Republicans on this measure.
The White House also opposed the second measure, and given the president's willingness to sign a bill to extend all the expiring tax cuts, there was never any doubt about the outcome of the day's proceedings in the Senate.
The day's events capped a week that included a meeting at the White House at which Obama and top congressional Republicans sat down together for the first time since the elections.
Both the president and Republican lawmakers pledged afterward they would try to work together for the good of the economy, and agreed to set up a small negotiating group to discuss the tax issues.
The White House, Reid and Republicans have been negotiating quietly, and McConnell made a point of saying he had been in frequent touch with the administration in recent days.
In addition to tax cuts, Obama has made ratification of a new nuclear arms control treaty with Russia a priority of the postelection session of Congress, reducing his leverage with Republicans in the struggle over taxes.
Senior Senate Republicans have indicated they will not try to interfere with a debate on the New START treaty as long as government spending and tax cut issues have been resolved to their satisfaction.
A two-thirds majority is required for ratification of the treaty, meaning the White House will need the support of at least nine Republicans to prevail. Vice President Joseph Biden and other officials have been involved in talks with several Republican senators in hopes of lining up the votes needed.
This program aired on December 5, 2010. The audio for this program is not available.
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