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House Democrats Balk At Tax-Cut Package

House Democrats defied President Obama on Thursday, shooting down a deal between the White House and Republicans lawmakers to renew the Bush-era tax cuts in exchange for an extension of unemployment benefits.

Democrats, angered by the plan to extend tax cuts to the wealthiest of Americans amid huge budget deficits and falling government revenues, passed a resolution saying they would not vote on the package in its current form.

Peter Welch of Vermont was among those who he said balked at "acceding to Republican demands to extend the Bush tax cuts to millionaires and billionaires."

"If it's take it or leave it, we'll leave it," said Lloyd Doggett of Texas, while Washington's Jim McDermott said, "It's a pretty clear message: We don't like the bill."

President Obama had warned Democrats on Thursday that the fate of the measure would determine whether the economy "moves forward or backward."

Although 54 House Democrats had told Speaker Nancy Pelosi that they opposed the deal, several party lawmakers had predicted that it would eventually pass.

Rep. Barney Frank of Massachusetts had said Friday that he expected that the tax cut compromise would be passed by "virtually all the Republicans and a minority of Democrats." He said he had planned to vote against it.

House Majority Leader Steny Hoyer had said that Democrats had no choice but to accept the tax package even if it includes tax cuts for the rich, because continuing to fight would put cuts for middle- and lower-income people at risk, and jeopardize unemployed workers who badly need jobless benefits.

"We're going to have an increase in taxes on working Americans ... if we continue to have gridlock," said Hoyer, a Maryland Democrat.

Another sticking point with Democrats has been an exemption for the first $5 million of a deceased person's estate, and to tax the rest at 35 percent. Congressional Democrats want a 45 percent tax rate on anything above $3.5 million. Without congressional action, the estate tax would revert to an even higher rate: 55 percent on estates valued above $1 million.

The lame-duck Congress was also poised to decide the fate of several other key pieces of legislation on spending, military policy and immigration.

Guns And Butter

A spending bill to keep the federal government operating through next September is now in the hands of the Senate after it passed the House on Wednesday night by a narrow 212-206 vote.

The House version of the omnibus bill caps the annual operating budgets of federal agencies at $1.2 trillion — a $46 billion cut from President Obama's request. It also includes $159 billion to run the wars in Afghanistan and Iraq.

Senate Democrats are working on a different approach that would provide slightly more money and would include thousands of pet projects sought by lawmakers. Republicans have threatened a filibuster.

Don't Ask, Don't Tell

A controversial measure to repeal the 17-year-old law known as "don't ask, don't tell" and allow gays to serve openly in the military is the key sticking point in a defense policy bill that looked to be stuck in the Senate.

The change would require the president and the Pentagon to certify that such a change would not damage military effectiveness.

GOP senators, led by Arizona's John McCain, strongly oppose the measure.

On Wednesday, the bill stalled in the Senate after Sen. Susan Collins (R-ME) said she would not vote to advance the legislation on procedural grounds and Democrats feared a critical test vote would fail. Spokesmen for Senate Majority Leader Harry Reid and Collins said talks would continue Thursday.

The DREAM Act

Senate Democrats responded to GOP objections by temporarily setting aside consideration of the "Dream Act" — a controversial measure to provide illegal immigrants who arrived before age 16 a path to U.S. citizenship.

President Obama and Hispanic activists have supported the bill, which passed the House by a 216-198 vote on Wednesday after heated arguments from Republicans, who have labeled it an amnesty for illegal aliens.

Democrats say they will try to move the House-passed version after the Senate acts on the spending and tax cuts measures. Republicans have said they won't agree to consider anything else until those issues are addressed.

The bill grants hundreds of thousands of undocumented immigrants brought to the United States as children a chance to gain legal status if they enroll in college or join the military.

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