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Clear tax plan or see new slump, Obama says

WASHINGTON » Raising the direst alarm yet, the Obama administration warned fellow Democrats yesterday that if they defeat the big tax-cut compromise detested by many liberals, they could jolt the nation back into recession.

President Barack Obama appealed anew for Congress to "get this done" and insisted that more congressional Democrats would climb aboard as they studied details of the $900 billion year-end measure. Several did announce support yesterday, but at least one said there still was "a mood to resist."

Sen. Daniel Inouye reluctantly supports the compromise.

The senior Hawaii Democrat said in a statement yesterday that if he has to back an extension of Bush-era tax cuts for the wealthy in order to help working families, the unemployed and the poor have a good Christmas, "then I will hold my nose and vote for it."

Sen. Daniel Akaka, a fellow Democrat from Hawaii, said in a statement that he, too, will support the pact, but has strong reservations about continuing tax cuts that increase the annual budget deficit and national debt.

U.S. Rep. Mazie Hirono, also a Hawaii Democrat, said she hopes to vote on a better package. Hawaii Republican Rep. Charles Djou supports the accord.

One Democratic opponent, Rep. Barney Frank of Massachusetts, forecast a result that would abruptly reverse Congress’ voting pattern of the first two years of Obama’s term: "It will be passed by virtually all the Republicans and a minority of Democrats." He said he would vote against it.

Larry Summers, Obama’s chief economic adviser, told reporters that if the measure isn’t passed soon, it will "materially increase the risk the economy would stall out and we would have a double-dip" recession. That put the White House in the unusual position of warning its own party’s lawmakers they could be to blame for calamitous consequences if they go against the president.

With many House and Senate Republicans signaling their approval of the tax cut plan, the White House’s comments were aimed mainly at House Democrats who feel Obama went too far in yielding to Republicans’ demands for continued income tax cuts and lower estate taxes for the wealthy.

Obama says the compromise was necessary because Republicans were prepared to let everyone’s taxes rise and to block the extension of unemployment benefits for jobless Americans if they didn’t get much of what they wanted.

Economists say the recent recession officially ended in June 2009. But with unemployment at 9.8 percent, millions remain out of work or fearful of losing ground economically, and the notion of the nation falling back into a recession would strike many as chilling. It also could rattle markets and investors.

The deal Obama crafted with Senate Republican leaders would prevent the scheduled Dec. 31 expiration of all the Bush administration’s tax cuts enacted in 2001 and 2003, even though Obama had often promised to end the cuts for the highest earners.

House Democrats, who will lose their majority in January, still hold a 255-179 edge in the current Congress. To pass a big bill with mostly Republican votes would mark a dramatic departure from recent battles, such as the health care overhaul, which was enacted with almost no GOP support in either chamber.

Pelosi and other House Democratic leaders continued to remain neutral to the tax cut compromise, criticizing some aspects but stopping short of urging or predicting its demise.

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