House lawmakers are returning to Capitol Hill to weigh a proposal by GOP leaders to extend the 2-percentage-point cut in the payroll tax through the end of the year and add the approximately $100 billion cost to the nation's $15 trillion-plus debt instead of scrounging around the budget for ways to pay for 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.
The idea is sure to be a topic of conversation Tuesday at the weekly closed-door conferences of Senate Democrats and Republicans.
House Speaker John Boehner, R-Ohio, Majority Leader Eric Cantor, R-Va., and GOP Whip Kevin McCarthy of California said 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 delivers about $20 a week to a worker making $50,000 a year and a tax cut totaling $2,000 this year for someone making a $100,000 salary.
Democrats were encouraged and said the development could break an impasse over the payroll tax proposal and the other expiring provisions.
"We've been making the point that when (it comes to) tax cuts for folks at the very top, the House Republicans went to great lengths to change their rules to say you don't have to pay for those," said Rep. Chris Van Hollen, D-Md. "And yet they've been saying that when it comes to a short-term, 10-month payroll tax cut for middle-income people, all of a sudden you have to pay for it."
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.
"There is no reason all three of these priorities cannot proceed at the same time," House Minority Leader Nancy Pelosi, D-Calif., said.
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 for several weeks in 2010, and delays in adopting the Medicare fix can be dealt with by delaying the processing of Medicare claims.
"It is prudent for our leadership to take whatever action is necessary to ensure American workers are not hit with a tax increase on March 1," said Rep. Dave Camp, R-Mich., the lead GOP negotiator.
The White House did not embrace the House leadership idea.
"We are willing to work with them to offset it in a responsible way," White House press secretary Jay Carney said. "And we expect Congress to get its work done and to extend it — the payroll tax cut, unemployment insurance and the doc fix." But Carney added, "Let's just see how this process plays out."
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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