Senate Dems balk at ending Bush-era tax rates; Update: McConnell says he’s prepared to “do a grand bargain”

If Barack Obama wants to go into electoral battle on the promise to hike taxes, he may find the ranks behind him thinning significantly.  The Hill reports that seven key Democrats in the Senate will block attempts to raise the income-tax rates for the highest-earning Americans without a comprehensive tax reform plan, which means that Republicans might succeed in preventing Obama from running on his best class-warfare argument:

A growing number of Senate Democrats are signaling they are not prepared to raise taxes on anyone in the weak economy unless Congress approves a grand bargain to reduce the deficit.

At least seven Democratic senators have declined to rule out supporting a temporary extension of the Bush-era income tax rates, breaking with party leaders who have called for letting the rates expire for people earning more than $1 million per year.

That gives Senate Republicans a chance to push a temporary extension similar to the deal Minority Leader Mitch McConnell (R-Ky.) struck with President Obama in December of 2010.

Democrats running for reelection, such as Sens. Jon Tester (D-Mont.) and Joe Manchin (D-W.Va.), have declined to endorse their leadership’s call for a tax increase on wealthy families.

That’s not entirely bad news for Obama, either — assuming he takes advantage of it.  The Taxmageddon effect on the economy has already started, with businesses and investors sheltering capital in anticipation of heavy damage at the beginning of next year.  Resolving that with a temporary one-to-two-year compromise would encourage more risk and investment, although probably not an overwhelming amount of it, given the state of demand at the moment.  That could produce a couple of good months of economic indicators and give Obama some breathing space.

The question will be whether Obama can take a deal.  He has spent nine months demonizing Republicans and blaming the wealthy for using tax rates that have been in place for more than a decade.  A reversal now would undercut his argument against Mitt Romney in the general election, and it’s difficult to gauge which option would do the most damage — pushing Taxmageddon until the election, or disappointing his progressive base one more time on tax rates ahead of it.  Unfortunately, Obama won’t have the option of getting comprehensive reform passed in the next few months in order to avoid having to make this choice, thanks to his abandonment of Simpson-Bowles sixteen months ago — and it’s too late to adopt it now.

That’s not the only way in which some Democrats might be abandoning Obama this summer.  Manchin and his successor as West Virginia Governor Earl Ray Tomblin  have announced that they will not attend the Democratic convention in Charlotte — as they cannot commit to endorsing Obama:

Democrats U.S. Senator Joe Manchin, Governor Earl Ray Tomblin and Congressman Nick Rahall, who all face reelection battles this November, have decided to skip the Democratic National Convention in September.

The decisions of the three to stay home come after increasing pressure from Republicans to declare whether or not they support President Obama for reelection.  Rahall, who represents West Virginia’s third district, has already said he backs the President, but Manchin and Tomblin have refused to commit.

The West Virginia Delegate Selection Plan rules suggest that unpledged delegates had to declare who they planned to support.  It appeared that the deadline for the declaration was Tuesday.

Tomblin’s campaign spokesman Chris Stadleman said of the decision, “As he has said, he has serious problems with both Governor Romney and President Obama.  The Governor feels that his time is best spent working in West Virginia to move our state forward instead of attending a four-day political rally in North Carolina.”

Manchin, in a prepared statement, said, “I intend to spend this fall focused on the people of West Virginia, whether that’s representing them in my official U.S. Senate duties or here at home, where I can hear about their concerns and ideas to solve the problems of this great nation. I will remain focused on bringing people together for the next generation, not the next election.”

Obama can thank his war on coal for this abandonment rather than his economic policies.  West Virginia gets almost all of its electricity from coal, and a good chunk of their economy and jobs, too.  Tomorrow, the Senate will vote on a measure to overturn the Obama administration’s MACT rule, an EPA change that would create $21 billion in compliance costs each year — and cost 183,000 jobs, plenty of them in West Virginia.

I’d expect Manchin to abandon Obama on this bill, too, and perhaps a few of these same Democrats.

Update: Senate Minority Leader Mitch McConnell went on CBS today to put more pressure on Obama to cut a deal:

“We are prepared,” McConnell says, “to do a grand bargain.” He rebuffs Charlie Rose’s contention that Democrats want fairness and budget discipline with a reminder that nearly half of all Americans already don’t contribute in federal income tax as it is.

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