WRAPUP 3-U.S. Congress passes Obama tax deal

* Bill heads to Obama to sign into law

* Many of the president’s fellow Democrats vote no

* IMF chief says stimulus needed, but warns of debt
(Adds Geithner statement, House vote party breakdown)

By Kim Dixon and Thomas Ferraro

WASHINGTON, Dec 17 (BestGrowthStock) – The U.S. Congress gave final
approval late on Thursday to the deal President Barack Obama and
Republicans made to extend expiring tax cuts — a high-stakes
gamble to create jobs at a cost of deepening the U.S. debt.

Over objections from many of Obama’s fellow Democrats, the
House of Representatives, on a 277-148 vote, passed the $858
billion package of renewed tax cuts and more unemployment
benefits in an economy saddled with a nearly 10 percent jobless
rate.

The measure, approved overwhelmingly by the Senate on
Wednesday, was expected to provide at least a short-term boost to
the U.S. economy but add to a $14 trillion national debt that
some fear is nearing dangerous levels.

Treasury Secretary Timothy Geithner said while the Obama
administration doesn’t agree with everything in its sweeping
compromise with Republicans, “This legislation is good for
growth, good for jobs, good for working and middle class
families, and good for businesses looking to invest and expand
their workforce.”

But many Democrats complained that Washington was handing
some of the nation’s wealthiest people tax breaks they said would
not be reinvested into the fragile economy. But backers of the
measure prevailed.

“If it works well, our (economic) growth rate should go up at
least a full point next year,” reducing the jobless rate, said
Democratic Representative Jane Harman. “That is worth taking this
bet.”

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Full coverage of tax and deficit debates [ID:nN06200548]

Microsite-Taxes and deficit http://r.reuters.com/des29q

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Like the Senate, the vote on passage in the House was
bipartisan. While 139 House Democrats voted for it, 112 opposed
it; 138 Republicans voted yes and 36 voted no.

Congress was racing to enact the legislation as it faced an
end-of-year deadline when the Bush-era tax cuts from 2001 and
2003 were set to expire.

The bill marked the second time in nearly two years that
Congress rammed through a massive economic stimulus. The first
one, Obama’s $814 billion spending bill, was opposed by
Republicans who complained about its impact on annual deficits,
now hovering at about $1.3 trillion annually.

IMF Managing Director Dominique Strauss-Kahn said economic
stimulus was vital for the United States because “growth is the
main problem to fix.”

“But, having in mind always that there is no free lunch. And
so what you do today has to be repaid later on. And you cannot
just do it now without saying, ‘How are you going to repay it?'”
Strauss-Kahn told Reuters on Thursday.

The bill would extend tax cuts for two years for millions of
Americans, even the wealthiest. Besides renewing jobless benefits
it would provide a variety of other tax breaks for working
families, college students and businesses. It also would prevent
a spike in taxes on capital gains and dividends.

Republican Representative Mike Pence, who is exploring a
possible run for president in 2012, criticized the legislation
because it only extended the tax cuts temporarily.

“The reality is uncertainty is the enemy of prosperity,”
Pence said. “It’s a bad deal for taxpayers, it’ll do little to
create jobs.”

VICTORY FOR OBAMA, REPUBLICANS

The bill represents a major victory for Republicans, who
fought hard to keep taxes low on the highest incomes, and marks a
move to the political center by Obama after his party lost
congressional elections in November.

Many economists predict the tax package could add up to 1
percentage point to economic growth next year, due partly
to a one-year cut in the payroll tax and removal of uncertainty
about taxes in general.

With more money in their pockets, Obama hopes people will
spend more and thus encourage job growth.

Particularly irksome to House Democrats was a provision
raising the exemption threshold for the estate tax to $5 million
from $3.5 million in 2009 and cutting the estate tax rate to 35
percent from 45 percent.

House Democrats’ attempts to raise that tax failed.

Obama’s current position on taxes contrasts sharply with his
stance earlier this year when he and his fellow Democrats fought
against renewing tax reductions for the wealthiest Americans —
those with household incomes above $250,000 — while supporting
continued cuts for middle-class taxpayers.

But with Republicans drawing a line in the sand on the issue
and scoring major victories in Nov. 2 congressional elections,
Obama acquiesced on tax cuts for upper-income Americans.
(Writing by Richard Cowan; Additional reporting by Donna Smith,
David Morgan and David Lawder; Editing by Peter Cooney and Sandra
Maler)

WRAPUP 3-U.S. Congress passes Obama tax deal