President Obama Urges Action on Unemployment Benefits, Tax Cuts

Dec. 2, 2010— -- President Obama today urged members of Congress to extend benefits for the unemployed, which expired Wednesday for about 2 million Americans, and expressed hope that lawmakers will come together on tax cuts even though Republicans and Democrats continue to squabble over both issues.

House Democrats today passed a bill to extend tax cuts for individuals who make $200,000 a year or less and couples who make up to $250,000. But the bill is unlikely to pass the Senate.

The president today acknowledged the tax cut dilemma going forward and touted the work of administration officials who are working with lawmakers on both sides of the aisle to come up with a solution.

The president "applauds the House for passing a permanent extension. But, because Republicans have made it clear that they won't pass a middle class extension without also extending tax cuts for the wealthy, the president has asked Director Lew and Secretary Geithner to work with Congress to find a way forward," Press Secretary Robert Gibbs said in a statement. "The talks are ongoing and productive, but any reports that we are near a deal in the tax cuts negotiations are inaccurate and premature."

Geithner and Lew have been in talks with six Republican and Democratic House leaders to find a middle ground on the tax cuts. When asked by reporters today if the tax negotiators are close to a deal at the start of their third meeting, Sen. Max Baucus, D-Mont., only said, "We'll see."

Republicans continue to argue that Bush-era tax cuts should be extended for all Americans, regardless of income.

Obama today expressed hope for a middle ground, even as the two parties continue to spar just days after a White House summit where the president and lawmakers expressed hopes for bipartisanship,

"I believe it will get resolved," Obama said after the meeting. "That doesn't mean there may not be some posturing over the next several days. But I'm confident in the end, people are going to recognize that it's important for families who are still struggling to have some relief and it's important for our economy to make sure that money is still out there circulating at a time when we are recovering but we're not recovering as fast as we need to."

Incoming speaker of the House John Boehner accused Democrats today of playing political games when it comes to taxes.

"[I am] trying to catch my breath so I don't refer to this maneuver going on today as a chicken crap, all right?" Boehner said at a press conference today. "The last thing our economy needs right now is a job-killing tax hike, and that's what this plan of theirs would mean. I think it's pretty clear to get the economy going again and create jobs, we need to cut spending and stop all of the coming tax hikes."

Unemployment Benefits Expiration to Impact Millions

The president also pushed lawmakers today to extend unemployment benefits.

"Our hope and expectation is that unemployment insurance is something that traditionally has had bipartisan support, is something that once again will be dealt with as part of a broader package," the president said following a meeting with newly elected governors.

Obama's Council of Economic Advisors today released a state-by-state breakdown on the economic ripple effect of letting long-term benefits expire.

If Congress doesn't extend the benefits, seven million unemployed Americans could lose coverage by next November, the report stated.

The report shows "the consequences that inaction on extending unemployment benefits would have on American families," a senior administration official said earlier today. "In December alone, more than two million Americans will lose the temporary support that helps them keep food on the table and make ends meet while they fight to find a job if Congress doesn't act."

The Labor Department estimates that federal unemployment benefits have kept 3 million Americans out of poverty during this financial crisis. But if they are not extended by Dec. 11, 635,000 unemployed Americans will lose their benefits. By Christmas that number will escalate to 1.6 million and then almost 2 million by New Year's Day. By the end of January, the agency expects about 3.25 million Americans will be cut off.

Most states fund at least 26 weeks of unemployment benefits, but the federal government has been offering an additional 73 weeks of help.

Congressional Republicans argue that the cost is too high and that lawmakers need to review other budget cuts and extending tax cuts before discussing the benefits.

Lawmakers are walking a tight rope because while the benefits extension would add considerably to the already burgeoning U.S. budget deficit, it would help the economy in the short-term by putting more money into the system, some economists say.

"The emergency unemployment insurance program puts $5-6 billion into the economy each and every month so you tote that up over a year that's $80 billion. That's a lot of money," said Moody's economist Mark Zandi.

Unemployment nationally is at a staggering 9.6 percent, and although the job market is improving slowly, millions of Americans still rely on federal and state benefits to keep them financially afloat.

New applications for unemployment aid rose last week by 26,000 to 436,000, according to a Labor Department report released today.

Congress Spars Over Unemployment Benefits, Tax Cuts

House lawmakers today voted on extending the Bush-era tax cuts for the middle class while letting tax cuts for high-income Americans expire on Jan. 1. House members approved the extension of tax cuts for individuals making less than $200,000 and couples making less than $250,000.

Even though the bill passed the House, experts say the move is more a symbolic gesture on the part of House Democrats.

Meanwhile, Senate Republicans -- in their own show of symbolism -- have refused to work on any other legislation until the chamber finds common ground on tax cuts.

"It's time Democrats put the priorities of the voters first," Senate minority leader Mitch McConnell, R-Ky., said in a statement today. "At the end of the month every taxpayer suffers a pay-cut unless we stop it. But Democrats would rather spend the Senate's limited time on Don't Ask Don't Tell and Immigration. They'd rather come down to the floor to talk about filibuster rules."

Some Changes Taxpayers Can Expect If Tax Cuts Expire

-The lowest tax bracket, currently 10 percent, will rise to 15 percent--in effect, a 50 percent increase.

-Reinstatement of the so-called marriage penalty: Married employees will no longer have relief through the 15 percent tax bracket but will pay more than two single individuals with the same income.

-The child tax credit -- currently $1,000 for families with a child under 17 -- will drop to $500.

-An increase in the supplemental tax rate: Persons receiving bonuses, commissions, or other forms of supplemental pay will see payroll withholding rise from today's 25 percent to 28 percent.

Other changes coming up in 2011 will also make the year tougher for many American families:

-Expiration of the "Making Work Pay" tax credit, which for the past two years has plumped a few bucks more take-home pay ($7.70 a week for individuals) into the wallets of the middle class.

-A reduction in the deductibility of commuting costs (currently up to $230, but up to only $120 next year).

--Expiration of the American Opportunity Credit, which had allowed parents jointly making up to $160,000 to take as a tax credit up to $2,500 for money spent on their kids' college costs.

ABC News' Matt Jaffe contributed to this report.