Washington Extra – Black box

December 21, 2011

For the past week or so, we’ve watched Democrats and Republicans playing chess on the payroll tax cuts, trying to outmaneuver each other and gain the upper hand in this final bitter budget battle of 2011. Today, it looks like the match moved off the chessboard and into the unknown.

In this vacuum, people are struggling to know what happens next. Eric Lascelles, chief economist at RBC Global Asset Management in Toronto, told us his confidence that the tax cut will be extended in 2012 “is beginning to waver.”

“As usual,” he added, “the political process is such a black box it’s hard to credibly put odds on this.”

President Obama might be feeling the same way, especially after he seemed fairly certain Saturday that the extension was all sewn up by the deal in the Senate. He came out today and said “let’s not play brinkmanship. The American people are weary of it.”

Obama may get something worse than brinkmanship, and that is nothing happening. There will be no votes in the House  Wednesday and we hear some members who live in faraway places like California are heading home for Christmas. They will come back this week if needed, but it is increasingly looking like they won’t be. Congress may be effectively shutting down for the holidays, this year’s business far from finished.

Here are our top stories from Washington…

Obama says time running out for payroll tax cut deal
President Obama demanded that Republicans in the House of Representatives quickly pass a short-term extension of a payroll tax cut, showing an unwillingness to back down in a fight that could result in higher taxes for 160 million American workers. The House rejected a short-term deal passed by the Senate and called for fresh negotiations on the expiring tax break that saves the average American worker $1,000 a year. But Harry Reid, leader of the Senate, insisted he would not recall the chamber to reopen negotiations.

For more of this story by Thomas Ferraro and Richard Cowan, read here.

Broken U.S. tax code joins two lawmakers in quest
While party leaders battle over a payroll tax deal, the two top tax writers in Congress are quietly reaching across the partisan divide to build a bridge for what could become a major restructuring of tax law. Senate Finance Committee Chairman Max Baucus and David Camp, who chairs the tax-writing House Ways and Means Committee, may not always see eye-to-eye. But the two firmly agree that the tax code, riddled with special interest breaks and loopholes, is not serving the economy well and badly needs an overhaul.

For more of this story by Donna Smith, read here.

Slumping Gingrich promises sharper counter-punch
Slipping in polls under an onslaught of attacks, Republican presidential contender Newt Gingrich promises to wage a sharper and more aggressive campaign in the final two weeks before Iowa kicks off the party’s nominating race. Gingrich says he will be quicker to respond to attacks and more agile in getting his message across to voters who may have lost faith in him after rivals launched a withering barrage of criticism of his past as a Washington insider.

For more of this story by John Whitesides, read here.

Romney goes on TV to attack Gingrich
Presidential candidate Mitt Romney unloaded on rival Republican Newt Gingrich on a liberal television network, comparing him to former candidate Herman Cain and others who have led the field briefly before flaming out. “(Gingrich’s) lead is not as much as it used to be,” Romney said on MSNBC’s “Morning Joe.” “But that’s sort of the process that other people have gone through.” “I suspect he’ll lead until he doesn’t lead.”

For more of this story by Sam Youngman, read here.

Jump in U.S. housing starts points to recovery
Housing starts and building permits jumped to a 1-1/2 year high in November as demand for rental apartments rose, suggesting the housing market was entering a tentative recovery. The data was the latest sign of a quickening of an economic recovery that still faces risks both at home and abroad. “Investors should take heart that if Europe doesn’t melt down and Congress figures out how to extend the payroll tax cut, the economy can continue to gain momentum,” said Joel Naroff of Naroff Economic Advisors.

For more of this story by Lucia Mutikani, read here.

Reading tea leaves on North Korea no easy task
The cause of Kim Jong-il’s death did not surprise Western intelligence agencies, but the timing did. Kim Jong-il, 69, had a stroke in 2008, high blood pressure, diabetes, and enjoyed cognac and smoking cigars, so when he suffered a heart attack, it did not come as a shock to Korea experts. In the difficult task of deciphering one of the most closed societies on the planet, it is unclear how long it would have taken for word to leak out if North Korea had not itself announced the death of its leader on Sunday.

For more of this story by Tabassum Zakaria and Mark Hosenball, read here.

From elsewhere…

Fierce clashes in Cairo, Clinton voices outrage
Egyptian police and soldiers fired guns and teargas to try to clear protesters from Cairo’s Tahrir Square, the fifth day of clashes that have killed 13 people and drawn a stinging rebuke from Secretary of State Hillary Clinton. Clinton condemned as “particularly shocking” incidents such as one in which two Egyptian soldiers were filmed dragging a woman protester on the ground by her black full-body veil, exposing her bra, then clubbing and kicking her. “Women protesters have been rounded up and subjected to horrific abuse. Journalists have been sexually assaulted. And now women are being attacked, stripped and beaten in the streets,” Clinton said at Washington’s Georgetown University.

For more of this story, read here.

For more stories from our Washington correspondents visit www.reuters.com and stay informed.

Photo Credit:  REUTERS/Yuri Gripas  (House Majority Leader Eric Cantor walks to his office after House voting); REUTERS/Jason Reed (President Obama); REUTERS/Fred Prouser (house under construction in Los Angeles)

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