Bloomberg News

Republicans Aim to Avoid Blame for Payroll Tax-Cut Impasse

February 13, 2012

(Updates with Reid spokesman comments in sixth paragraph and McConnell quote in 18th paragraph.)

Feb. 7 (Bloomberg) -- Republicans and Democrats in Congress sought to blame one another for stalled House-Senate negotiations over how to continue a payroll-tax cut set to expire at month’s end.

House Speaker John Boehner told reporters today that Senate Democrats haven’t provided an alternative to the House-passed plan for spending reductions to finance extending the payroll tax cut through the rest of 2012.

“We have significant concerns whether Senate Democrats are willing to work with House Republicans on the payroll tax-cut bill,” said Boehner, an Ohio Republican.

House and Senate negotiators have reported little progress toward agreement on a plan that also would extend long-term unemployment benefits and avert a 27 percent cut in Medicare reimbursements to doctors. House Republicans insist these provisions be financed with spending cuts.

House Democratic Whip Steny Hoyer told reporters today he was “very concerned” that negotiators won’t reach an agreement to extend the tax break before it expires. Whether negotiators “can get to an agreement seems in doubt at this time.” He said he wasn’t “for a short-term extension” of the payroll tax cut because it wouldn’t “lend certainty to the economy.”

Reid Alternative

Senate Majority Leader Harry Reid, a Nevada Democrat, is moving forward with a plan to offer an alternative payroll tax cut extension that lawmakers could consider if the conference panel deadlocks. That measure would extend the tax break through the rest of 2012, Reid spokesman Adam Jentleson said today. Reid hasn’t decided how to cover the cost of the extension and is considering options such as selling spectrum allocations and capping deductions for high earners, Jentleson said.

Any delay in extending the tax cut “redounds to the benefit of the Republicans who want this economy to stumble,” Hoyer said. The Maryland Democrat said it would be a “tough sell” for Republicans to blame Democrats for a further delay after they “created a confrontation” over the issue in December.

Congress agreed to a two-month extension of the payroll tax cut in December to avoid a January tax increase for about 160 million workers. Boehner accepted the two-month extension after the Senate wouldn’t agree to the House measure.

Representative Dave Camp, a Michigan Republican who is leading a House-Senate panel negotiating on a tax-cut extension, said he is awaiting specific proposals from Senate Democrats.

Keep Going

“We’re moving ahead but we don’t have a lot of time so we need to keep going,” Camp told reporters after the meeting.

“We’re hearing from both leaders and frankly, I guess my only point would be let’s let the conferees work,” Camp said. “I don’t think the comments from either side of leadership from either body are particularly helpful.”

Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee, told reporters: “We’re clearly willing to work. We will find a compromise.” Baucus said he would soon offer a proposal on extending the unemployment insurance to address Republican concerns.

Republicans have proposed reducing emergency jobless benefits in states hit hard by the recession from a maximum 99 weeks, and letting states require recipients to pass drug tests and work toward a high school equivalency diploma.

Boehner’s comments reflected an effort by House Republicans to avoid a repeat of the December debate on the payroll tax cut, when they were blamed for legislative brinkmanship.

Hoyer said Democrats still favor a surtax on millionaires and ending oil-company tax benefits to help finance the package.

Backup Plan

Senate Minority Leader Mitch McConnell, a Kentucky Republican, in a floor speech accused Reid of subverting the talks by saying he is working on a backup plan if the negotiations don’t lead to an agreement.

“The problem isn’t with Republicans,” McConnell said, adding that Reid “should be encouraging that effort, not rooting for its failure.”

McConnell later told reporters he sees a “disturbing trend” of Democrats walking away from bipartisan deals so they can blame Republicans for obstruction.

Baucus said the conference committee must get close to a resolution “in a matter of days.” It will be “helpful for both sides to learn what can and cannot be accomplished to help us reach that compromise,” Baucus said. “We have very little time.”

Baucus has said the panel might have to consider an extension for less than a full year if lawmakers don’t agree.

Three Options

The conference committee today debated three options to cover the $100 billion cost of extending the payroll tax cut package through 2012. Lawmakers are considering extending a pay freeze for members of Congress and federal workers, as well as requiring high earners to pay additional Medicare premiums. A separate provision would require more people to return overpayments of insurance subsidies when their income rises.

Together, the changes would cover about $70 billion of the measure’s cost.

Still, there was no sense that lawmakers were moving closer to an agreement. Senator Ben Cardin, a Maryland Democrat who has many federal workers in his state, said the committee shouldn’t agree to the pay freeze for government employees.

“It’s an affront to the fairness in our society of making sure that all of us contribute,” Cardin said. “Our federal workers have already had a two-year pay freeze.”

--With assistance from Richard Rubin, Peter Cook and Laura Litvan in Washington. Editors: Jodi Schneider, Bob Drummond

To contact the reporters on this story: Steven Sloan in Washington at ssloan7@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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