On Friday, President Barack Obama threw down the gauntlet to Republicans on taxes, effectively daring them to vote against a tax cut for the middle classes, just so that they can give an average of $100,000 in tax cuts to millionaires.

boehner_MitchOver the weekend, Republican leader of the House John Boehner seemed to shirk the challenge, but on Monday, Senate minority leader Mitch McConnell picked up the gauntlet and threw it right back. McConnell has promised to introduce legislation “today” to ensure that “no one in this country pays higher income taxes next year than they are right now.” There are no Republicans who support a tax hike, he said, effectively daring Democrats to vote for higher taxes when the economy is in the mire.

Washington Extra is not sure who will blink first. But whichever side you take in this debate, one thing is for sure: this “wrestling match,” as Obama called it, or game of high-stakes political poker if you prefer, does the economy no good at all.

Another big story bubbling up this week is a series of hearings on the Hill over China’s currency and trade policies, with Treasury Secretary Tim Geithner among those scheduled to appear. We are told that 93 lawmakers in the House have signed a letter urging Democratic leaders to get tough with China over its exchange rate practices. This looks from the outside more like political posturing than any real threat that legislation will be passed this year, but Beijing will be watching closely. The yuan has risen less than one percent since its currency peg was eased ahead of the G20 summit in June, but that appreciation has quickened in recent days, in what might be an attempt to dampen congressional anger.

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Senate Republicans firm on tax cuts for rich

Senate Republicans have enough votes to block President Barack Obama’s plan to extend tax cuts for the middle class while allowing those for the rich to expire, a spokesman for the Senate Republican leader said. Republicans scrambled to regroup on the tax issue ahead of November 2 congressional elections after House of Representatives Republican Leader John Boehner appeared to open the door for a possible compromise.