Tales from the Trail

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.

Over 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.

Here are our top stories from today…

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.

The “confidence” game that presidents end up having to play is a well-worn Washington tradition. It unfolds at a time when things just aren’t going well and the hunt for someone to blame is on.

The game begins with a question to the White House about whether the president has confidence in so-and-so. Then the response is dissected into tea leaves for analyzing whether the administration official will have a short or long future in serving the president.

On Friday, it was Treasury Secretary Tim Geithner being weighed on the confidence scale.

Forget about Afghanistan, healthcare and the economy. President Barack Obama took time out on Thursday to indulge in his favorite sport as he hosted cabinet members and lawmakers for a round of pickup games on the White House basketball court.

It was the biggest day of hoop dreams at the White House since Obama took office, and reporters disappointed at being kept away went one-on-one with Press Secretary Robert Gibbs before the opening tip-off.

As for why were journalists being barred: “To protect the privacy and the statistics of any of those involved,” he quipped at his daily briefing.

Who gets the billions?

The incoming Obama administration is preparing a major overhaul of the $700 billion financial bailout amid rising complaints in Congress that the payouts are not going to the right people.

The Washington Post reports that Treasury Secretary nominee Timothy Geithner and top Obama economic adviser Larry Summers have been looking at ways to broaden the bailout to include more help for homeowners facing foreclosure as well as to generate loans for municipalities, small businesses and consumers — and not just the financial giants that helped to create the mess.

Obama, meanwhile, is expected to formally announce his picks for top intelligence posts at a news conference around 10:45 a.m. EST. Obama’s choice to head the CIA, former chief of staff in the Clinton White House Leon Panetta, has drawn fire from some security insiders who complain that he lacks experience on intelligence matters.

Another day, another bailout. Stock futures point to a higher opening today after the U.S. government agreed to guarantee most of Citigroup Inc.’s potential $306 billion losses on high-risk assets.

President-elect Barack Obama today will formally unveil the economic team that will inherit this mess. The names of the top candidates, like Timothy Geithner and Larry Summers, have already been leaked, but the press conference could give more insight into their plans. It takes place at 11 a.m. Chicago time, noon EST.

One thing they’ll probably do is spend lots of money. Obama and congressional Democrats are preparing a stimulus package that could total as much as $700 billion over the next two years. The money would go to tax cuts for the middle class and spending on projects like roads and bridges.