Obama, GOP Set For Lame-Duck Showdown Over Tax Cuts

A wrangle over extending tax cuts for millions of Americans will be the first major test of whether President Barack Obama and resurgent Republicans can work together to fix the U.S. economy.

In the wake of the Nov. 2 election in which Republicans won control in the House, Obama and the Republicans must thrash out a deal or tax rates for everyone will rise in January.

The debate over taxes is likely to dominate the "lame-duck" session in Congress starting Monday, so called because the shift in power brought by last week's elections is not reflected until the new members take up their seats in January.

Obama's Democrats, who will continue to control both the House and Senate during the weeks-long session, might also end the "Don't Ask, Don't Tell," policy on gays in the military and ratify a new arms reductions treaty with Russia.

Some senators are pushing for a vote to castigate China during this time for keeping its yuan currency artificially low, but the bill looks set to languish because trade has lower priority than domestic economic matters.

Debate over taxes is the most pressing issue.

Republicans want a full extension of all tax cuts enacted during the administration of then-President George W. Bush which were timed to expire at the end of 2010. They say that failure to renew them would hurt the already ailing economy.

Obama and most of his Democrats favor extending tax cuts only for the first $200,000 of income of individuals, $250,000 for families.     
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