House Democrats are rebelling against President Obama's tax cut compromise with the Republicans. On Wednesday, they essentially rejected it in its current form by passing a non-binding resolution by voice vote to block it from coming to the House floor.
Obama's deal with the Republicans involves extending all of the Bush-era tax cuts for two years, which is what Republicans want, in exchange for extending unemployment insurance benefits for 13 months, which is what Democrats want.
This deal cuts taxes and increases government spending. It's essentially a stimulus package that will boost economic growth, create jobs, likely push the S&P 500 index higher, but add to the budget deficit and thus spook the Treasuries market.
The objection of House Democrats, especially those that lean to the liberal side, is the extension of Bush's tax cuts for families making over $250,000 a year. They feel that wealthy Americans do not need more tax breaks, especially given the ballooning U.S. public debt.
I have serious concerns about any package that continues tax breaks for millionaires and billionaires when they don't need them and we can't afford them, said Representative Edward Markey of Massachusetts.
Nancy Pelosi, Speaker of the House, said the extra tax cut for the top 3 percent [wealthiest people] does not create jobs and increases the deficit.
However, she said she will continue discussions with the President and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote.
House Democrats are rejecting the Obama tax cut compromise in its current form, which likely means they don't oppose it entirely but just want to negotiate more concessions from the Republicans.
In an MSN Money commentary, Jim Cramer, a former hedge fund manager and host of CNBC's Mad Money, said this deal will not get done without some dithering and horse trading and delay, delay, delay.