Capitol Hill weighs GOP payroll tax gambit

WASHINGTON — President Barack Obama said Tuesday he's hopeful Congress will renew a 2-percentage-point cut in the payroll tax before it lapses at the end of the month, but said it's important to also renew jobless benefits for millions of the long-term unemployed as well.

"Just pass this middle-class tax cut. Pass the extension of unemployment insurance," Obama said at a White House appearance. "Do it before it's too late and I will sign it right away."

Obama made his remarks a day after House GOP leaders dropped plans to require spending cuts to cover the nearly $100 billion cost of extending the payroll tax cut through the end of the year. The Republicans decided instead to add it to the nation's $15 trillion-plus debt.

The GOP turnabout could rile fiscal conservatives but party leaders want to make doubly sure they don't get the political blame in case the tax cut — which delivers $20 a week to a typical worker making a $50,000 salary — is terminated.

"Washington shouldn't hike taxes on working Americans right now," Obama said. "But that's exactly what's going to happen at the end of this month, in a couple of weeks, if Congress doesn't do something about it."

In the Democratic-majority Senate, a top leader said the proposal was a major step forward, even as other Democrats worried it could jeopardize efforts to renew unemployment benefits for millions of the long-term jobless and efforts to forestall a scheduled cut in fees to doctors who treat Medicare patients. Those proposals would remain in the hands of a House-Senate negotiating panel that's looking for spending cuts to defray the deficit impact.

House Minority Leader Nancy Pelosi of California said that Democrats in the chamber would support the tax cut if it comes up for a stand-alone vote. But she called upon GOP leaders to cancel next week's congressional recess if talks don't yield a compromise on the entire package.

Sen. Charles Schumer, D-N.Y., said he's still hopeful that House and Senate negotiators would reach agreement this week on all three provisions, especially the politically volatile issue of jobless benefits. But Schumer wouldn't say whether Senate Democrats would allow the payroll tax bill to pass separately before the other provisions.

Schumer said the implicit GOP threat of allowing jobless benefits to expire is "just as fraught will peril" as allowing the payroll tax holiday to lapse.

"We believe that we sort of have the upper ground," Schumer said.

The idea is sure to be a topic of conversation Tuesday at the weekly closed-door conferences of Senate Democrats and Republicans, and House Republicans will gather Tuesday evening to discuss it as well.

House Speaker John Boehner, R-Ohio, Majority Leader Eric Cantor, R-Va., and GOP Whip Kevin McCarthy of California said Monday the House could vote on the payroll tax measure this week but the renewal of jobless benefits and the Medicare "docs' fix" still would have to be paid for with spending cuts elsewhere.

The GOP statement came after intense talks over the weekend failed to produce an agreement. Republicans were pressing for pay cuts for federal workers and requiring them to contribute more to their pensions. They recoiled at a Democratic proposal to raise Transportation Security Administration per-ticket airline security fees.

"Democrats' refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don't go up on middle-class workers," the GOP leadership statement said.

Without action by Congress by the end of the month, payroll taxes will rise for 160 million Americans. The 2-percentage-point tax cut would deliver a tax cut totaling $2,000 this year for someone making a $100,000 salary.