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House Sets Up Battle Over Payroll Tax Cut, Pipeline

Dec 13, 2011

By Ben Weyl and Sam Goldfarb, CQ Staff

The House and Senate are set to clash this week on a high-priority package to extend the Social Security payroll tax cut as part of the ongoing partisan debate over how to boost the economy and spur job creation.

Although party leaders in both chambers support renewing both the payroll tax cut and long-term unemployment benefits, while preserving higher Medicare payments to physicians, lawmakers are sharply divided over how to finance the measure and whether to include unrelated matters.

Those differences raise questions about how and when Congress will enact legislation to extend the popular programs before they expire at the end of this month and lawmakers adjourn for the year.

The House is set to vote Tuesday on a Republican bill (H.R. 3630) that would renew those programs. After at first encountering conservative opposition to the prospect of extending the payroll tax cut, GOP leaders appear to have consolidated support for it in the Republican Conference and say they are confident that the House will pass the bill.

It would extend for one year the Social Security tax paid by employees at the current 4.2 percent rate as well as some assistance for workers who have been unemployed for more than half a year. It would extend for two years a “doc fix” that aims to prevent Medicare payments to physicians from being sliced by more than 27 percent. The Republican measure would cost a little more than $200 billion over 10 years, although that cost is fully offset in the bill.

Democratic Opposition

The measure is expected to garner few Democratic votes because of opposition to a number of provisions, most notably one that would expedite construction of the Keystone XL pipeline. The Obama administration recently determined that a final decision on building the pipeline would not be made until 2013.

The GOP push to force President Obama’s hand has largely become the focal point on both sides of the aisle, responsible for hardening GOP support as well as Democratic objections. (R-OH)

Last week, Speaker John Boehner (R-OH) said House Republicans would insist on provisions to remove barriers to the pipeline’s construction, saying it was “a no-brainer” that would create tens of thousands of jobs.

Obama, on the other hand, has said he would reject those efforts and has urged Congress to focus solely on keeping money in the public’s pockets and the U.S. economy. “However many jobs might be generated by a Keystone pipeline, they’re going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance,” Obama said last week.

As he introduced the bill on December 9, Boehner called it a compromise and urged bipartisan support. “This package does not include everything Republicans would like, nor does it have all that Democrats have called for,” said Boehner. “It is a win for the American people and worthy of the president’s signature.”

Shortly after, however, Senate Majority Leader Harry Reid (D-NV) said inclusion of the pipeline language would doom the bill in the Senate.

“With the middle class facing a huge tax increase on the first of January, now is not the time to be debating unrelated measures like an oil pipeline,” Reid said. “If the House sends us their bill with Keystone in it, they are just wasting valuable time because it will not pass the Senate.”

The GOP bill includes numerous provisions that Democrats find objectionable. One would replace a new pollution standard for industrial boilers. Another would limit the number of weeks a jobless worker can receive assistance.

Objectionable Offsets

Some provisions designed to offset the bill’s cost also drew Democratic ire.

The measure would slash spending for a prevention and public health fund established by last year’s health care overhaul law (PL 111-148, PL 111-152). It would set up a way to claw back subsidies paid to people who receive health insurance through new state-run exchanges and later become ineligible for the benefits. And it would require wealthier Medicare beneficiaries to pay higher premiums.

Some other proposed offsets are less controversial and might end up in an eventual compromise. For example, the bill would increase the fees that the two giant mortgage financial companies, Fannie Mae and Freddie Mac, charge for guaranteeing loans purchased in the secondary market. Senate Democrats included a similar proposal in their latest bill (S. 1944) to extend the payroll tax cut.

The House GOP measure also incorporates legislation (H.R. 1956) introduced by Texas Republican Sam Johnson aimed at reducing claims from illegal immigrants for the child tax credit. That credit is “refundable,” which means it can be paid to people who otherwise do not owe income taxes.

The bill would require people who attempt to collect the credit to provide a Social Security number, which is likely to limit the number of claims filed. Applications for other refundable benefits, such as the earned income tax credit, already must include a valid Social Security number.

The Republican bill would find further savings by overhauling the federal flood insurance program and freeing up slices of the broadcast spectrum for wireless broadband use. Obama has previously endorsed similar offsets.

In addition, the bill would reduce discretionary spending by extending through 2013 a pay freeze for federal workers that is already in effect through 2012.

Democrats have said they will not accept discretionary spending cuts beyond those incorporated in this past summer’s debt ceiling law (PL 112-25). And White House Press Secretary Jay Carney condemned the House Republican proposal on December 9 in part because it “breaks the bipartisan agreement on spending cuts that we reached just a few months ago.”

Over the past two weeks, Senate Democrats have twice pushed for a payroll tax cut extension financed by a surtax on individual income over $1 million. Solid GOP opposition to tax increases of any kind, however, prevented Democrats from collecting the 60 votes necessary to advance the legislation both times. Democrats seized on those votes to portray Republicans as interested in protecting the wealthy at the expense of the middle class.

Path to Compromise

Reid has signaled he is willing to finance the package without a tax increase, however, and that is likely to be the outcome if lawmakers can reach a compromise.

At the same time, Democrats are dug in against the Keystone pipeline, and Republicans might have to drop that demand in order to advance a bill. Any measure that can garner 60 votes in the Senate and a majority in the House is likely to rely on the backing of a bipartisan coalition similar to those that have been needed for high-profile spending bills throughout the year — and is likely to also disappoint both liberals and conservatives alike.

Rep. Steven LaTourette (R-OH) said December 9 that he expects House leaders will negotiate with their Senate counterparts after the House votes on the GOP bill. “Hopefully, by introducing it today, voting on it on Tuesday, it gives us enough time to do whatever it is they want to do,” said the longtime Boehner ally.

Boehner has targeted an adjournment date of December 16 or 18. But Senate Democrats have said they will work as long as it takes to clear the payroll tax cut extension. Congress also needs to finish the fiscal 2012 appropriations bills or at least continue financing the government through a continuing resolution. The current stopgap spending bill expires December 16.

 
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