Bloomberg News

Payroll-Tax Cut Extension Agreement Nearing, U.S. Lawmakers Say

February 14, 2012

Feb. 14 (Bloomberg) -- Congressional Republicans and Democrats said they were close to an agreement to extend through the rest of 2012 a payroll-tax cut, expanded jobless benefits and doctors’ Medicare reimbursements.

“It seems like we’re getting closer,” said Representative Fred Upton, a Michigan Republican and a member of a House-Senate conference committee on the legislation.

Senate Majority Leader Harry Reid, a Nevada Democrat, also expressed optimism, saying, “I’m very happy that we have the situation that has developed with the payroll tax.” Earlier, Reid told reporters he was “hopeful and cautiously optimistic” that the negotiations would yield an agreement.

Yesterday, House Speaker John Boehner and other Republican leaders offered to accept a payroll-tax cut extension without insisting on spending reductions elsewhere to cover the $94 million cost. The offer was intended to shift blame to Democrats if the measure fails and take-home pay for U.S. workers shrink by two percentage points next month.

Earlier today, Democrats said they wouldn’t be rushed into accepting the tax cut without also including expanded jobless benefits for people in states with high unemployment and a measure to avoid a 27 percent cut in doctors’ Medicare reimbursements.

Congress in December passed an extension of those measures through Feb. 29 after political pressure pushed Boehner and rank-and-file House Republicans to drop their objections.

Today, House Democratic Leader Nancy Pelosi of California said lawmakers should cancel trips to their home districts next week if lawmakers didn’t reach a deal on those three points. Reid added a fourth element when he said he wanted to attach $20 billion in expired tax breaks to the payroll package.

$70 Billion

Reid said lawmakers will need to find about $70 billion to cover the 10-year cost of extending unemployment benefits, addressing Medicare reimbursements and reviving some of the tax breaks.

Meanwhile, House leaders haven’t scheduled a vote on their measure, which would extend only the payroll tax cut and may encounter opposition from deficit-conscious Republicans. On the other side of Capitol Hill, several Republican senators aligned with the Tea Party said they are concerned about continuing the payroll tax cut without paying for it.

“I’m still wrestling with it,” Senator Pat Toomey, a Pennsylvania Republican, told reporters today.

Senator Rand Paul, a Kentucky Republican who has criticized the payroll tax break because he said it would reduce funding for Social Security, said not paying for it makes the provision an “even worse idea.”

Not ‘a Good Idea’

“I just don’t think it’s a good idea, particularly not to pay for it,” Paul told reporters yesterday. The House Republican leaders “feel trapped,” he said. “The president’s beating them up saying they don’t want to do anything and they’re just obstructing things.”

President Barack Obama held an event on the White House grounds today seeking to urge Congress to act quickly on the payroll tax cut and expanded unemployment benefits. He said with the economic recovery still fragile, lawmakers “shouldn’t hike taxes on working Americans.”

Obama said while there are “hopeful signs” that lawmakers are moving closer to an agreement, “you can’t take anything for granted in Washington.”

--With assistance from Richard Rubin, Kate Andersen Brower and Kathleen Hunter in Washington. Editors: Laurie Asseo, Jodi Schneider

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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