Bloomberg News

Year-End U.S. Spending Measure Held Up By Payroll-Tax Dispute

December 16, 2011

Dec. 13 (Bloomberg) -- A $1 trillion measure to fund the U.S. government has become a bargaining chip in Congress’s debate over how to extend an expiring payroll-tax cut.

Second-ranking House Democrat Steny Hoyer said his party is holding up the spending bill in an effort to force Republicans to remove “politically motivated” provisions from a separate measure to continue the payroll-tax cut, now set to expire in two weeks.

Passing the spending bill now would let House Republicans approve their version of the payroll-tax cut and adjourn for the year, forcing Senate Democrats and the Obama administration to accept it, Hoyer told reporters in Washington today.

The appropriations measure is “98 percent done,” said the Maryland Democrat. “What’s really holding this up” is the payroll-tax dispute, he said.

Congress is pushing to finish its work for the year, including the spending measure that combines nine bills to fund federal agencies for the fiscal year that began Oct. 1. A stopgap plan expires Dec. 16, and without action by Congress the government will shut down.

Lawmakers disagree over how to pay for the payroll-tax cut, with Democrats seeking a tax surcharge on the wealthy and Republicans proposing to continue a pay freeze on federal workers. Republicans also want to use the measure to expedite construction of an oil pipeline from Canada to Texas.

No Compromise

Hoyer said inclusion of the Keystone XL pipeline provision by House Republican leaders is “a clear politically motivated effort to make this a controversial bill” to win votes of “their most conservative members, who don’t care one whit about compromise.”

The House plans to vote today on the Republican payroll-tax plan, which Senate Majority Leader Harry Reid has said will die in his chamber.

“They’re wasting time catering to the Tea Party folks over there when they should be working with us on a bipartisan package that can pass both houses,” Reid, a Nevada Democrat, said today.

House Speaker John Boehner, an Ohio Republican, said he thought lawmakers had a deal on the spending measure.

Its authors, he told reporters, “smiled at each other, shook hands and it’s done.” Boehner said, “I’m hopeful that the Senate leaders will come to their senses” because “there’s no reason to hold this bill up.”

$7 Billion Lower

Many agencies are likely to face tight budgets under the still-unreleased spending bill. Though lawmakers couldn’t agree this year on tax increases or reductions in entitlement programs to reduce the federal deficit, they did decide in August to trim the approximately 40 percent of the budget that must be approved each year by Congress.

They set a discretionary spending limit of $1.043 trillion, or $7 billion lower than this year’s total, making it the second consecutive year appropriations have declined.

Many programs are likely to see cuts to accommodate a $5 billion increase for the Pentagon, whose $518 billion budget makes up about half of the measure.

That boost of about 1 percent would be a fraction of the annual increases the Defense Department has received in recent years. Over the past decade, the agency’s “base” budget has grown by 75 percent, not including $1 trillion for the wars in Iraq and Afghanistan.

Also in the spending bill, Democrats are objecting to Republican provisions targeting Obama administration policies on travel and sending money to Cuba, energy-efficient light bulbs and restrictions on public funding of abortions in Washington, D.C. In addition, Reid wants changes in the budget of the Commodity Futures Trading Commission, which regulates the derivatives market.

Lawmakers have reduced the number of policy “riders” woven into the must-pass legislation from the 140 that White House Budget Director Jack Lew estimates were initially there.

--Editors: Laurie Asseo, Mark McQuillan.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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