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Capitol Hill weighs GOP payroll tax gambit

By Andrew Taylor

Associated Press

Published: Tuesday, Feb. 14 2012 12:10 p.m. MST

President Barack Obama speaks to continue to push Congress to act to extend the payroll tax cut and unemployment insurance through the end of the year, Tuesday, Feb. 14, 2012, in the Old Executive Office building on the White House complex in Washington.

Pablo Martinez Monsivais, Associated Press

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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.

But Democrats warned that decoupling the payroll tax from the larger legislation could jeopardize efforts to renew the jobless benefits and the fix to the Medicare payment formula.

"It's completely irresponsible to leave behind nearly 5 million unemployed Americans whose benefits will expire and 47 million seniors and disabled Americans whose access to health care would be jeopardized," said Rep. Sander Levin, D-Mich., a member of the 20-lawmaker House-Senate negotiating panel.

The GOP move reflects a desire by party leaders to avoid a political hit if the payroll tax expires at the end of the month. And it would avoid burdening businesses with uncertainties regarding their payroll systems. On the other hand, jobless benefits lapsed four separate times — including a seven-week interruption — in 2010, and delays in adopting the Medicare fix can be dealt with by delaying the processing of Medicare claims.

The move by the GOP leadership still would leave it to negotiators to come up with $30 billion or $40 billion in deficit savings to extend jobless benefits averaging about $300 a week to people who have been out of work for more than six months. Republicans have pressed to cut the number of weeks from the maximum 99 permitted under current policies and economic conditions down to as few as 59 weeks. They also are pressing to require people receiving unemployment to enroll in GED classes and allow states to condition benefits on the passage of drug tests.

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