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AMT, Energy Bills: Will Half Solutions Be Better Than None?

Friday, 7 Dec 2007 | 2:24 PM ET
AP

What does gridlock in Washington mean, to business and to everyone else? It means avoiding the sacred cows of both parties even if that waters down whatever action government takes.

It means least-common-denominator solutions--or half-solutions--to whatever problem is on the table at the time.

That's what's happening on Pennsylvania Avenue in the alternative minimum tax debate. Both sides agree that roughly 20-million Americans who are not super-rich should be spared an AMT hit on their 2007 tax bills.

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The Senate approved the AMT patch, and former Labor Secretary Robert Reich, and CNBC's Larry Kudlow and John Harwood discuss the issue.

Democrats want to "pay for" the $51-billion cost of doing that by raising taxes on hedge fund managers in the name of "fiscal responsibility"; Republicans oppose that step in the name of "no new taxes." Since resolving that disagreement is to hard, the "pay for" issue will eventually be shelved and the cost of an AMT fix will simply go onto the nation's pile of debt.

It's also happening on energy legislation. With the public increasingly anxious about America's dependence on foreign oil, lawmakers in both parties have seized on higher vehicle fuel efficiency as a key step. The Democratic majority in Congress has seized on two others -- raising taxes on oil companies to help finance development of new energy sources, and requiring utilities to derive a fixed percentage of their energy from renewable sources.

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The House passes an energy bill with $21B in new taxes on oil companies, with James Pethokoukis, U.S. News & World Report, and CNBC's John Harwood & Bill Griffeth.

Republicans have opposed the latter two steps in the name of "no new taxes" (see above) and no unreasonable mandates. Lacking the votes to overcome a Republican filibuster or presidential veto, Democrats are likely to cave in and pass the higher fuel standards.

That's another least common denominator solution--the best Washington is capable of at the moment.

Questions? Comments? Write to politicalcapital@cnbc.com.