Tax deal moves forward despite doubts

(Reuters) - A plan by President Barack Obama to broadly extend tax cuts moved forward on Wednesday despite opposition from his own Democrats and fear in bond markets of long-term damage to the economy.
Senate Democratic leader Harry Reid said the chamber could begin to debate the proposal to extend all Bush-era income tax cuts within a day or two, in a sign Democrats may be conceding on the deal.
"It's further along than most people think," Reid said. "I don't think there is a great more to be done on that."
Obama struck an agreement on taxes this week with Republicans, who have grown in clout since winning control of the House of Representatives in last month's congressional elections.
The president has brushed off criticism from many Democrats that he has been too eager to compromise with the opposition. He urged Congress to debate the tax deal and said lawmakers need to "get this done."
Treasury prices plunged again on Wednesday, with benchmark yields hovering at their highest in six months, as debt markets worry the tax plan will stoke inflation and deepen the budget deficit.
"This tax agreement is a disaster for the U.S. fiscal situation," said Howard Simons, strategist at Bianco Research in Chicago.
The dollar, however, advanced on perceptions the tax cuts could increase U.S. economic growth.
Obama's plan would extend all individual tax cuts expiring at year end, in addition to renewing jobless benefits, a payroll tax cut and other measures.
Several economists said the plan could boost growth from a half to a whole percentage point next year, cut unemployment and lessen demand for the Federal Reserve to boost its bond-purchasing stimulus program.
White House economic adviser Larry Summers said failure to pass the plan would "materially increase" the chance of a double-dip recession.
NO BETRAYAL, SAYS OBAMA
Taxes would go up for almost all working Americans if political gridlock sets in and no extension of the cuts is approved.
Obama needs to slash unemployment and win over voters to help his bid for re-election in 2012. He said Democrats had not been "betrayed" by his tax deal with the Republicans because he was acting to spur the economy.
"I expect everybody to examine it carefully," Obama said. "When they do, I think they're going to feel confident that this is the right course."