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House GOP Rises Up Against Tax Deal, Limits Extension

Dec 19, 2011

A tumultuous congressional session is coming to a fitting end, with House lawmakers threatening to jettison a Senate compromise on a popular payroll tax break, even though senators have already left town thinking they had finished the year’s legislative business.

House Speaker John Boehner (R-OH) said Sunday that House Republicans oppose the Senate-passed two-month extension of the Social Security payroll tax cut, throwing into doubt the next steps on the bill and the final days of the legislative session.

Boehner called on House and Senate negotiators to assemble a conference committee to resolve differences on the bill (H.R. 3630), which the Senate passed 89-10 on December 17, and to come up with a one-year extension.

“We’ve got two weeks to get this done. Let’s do it the right way,” Boehner said on NBC’s “Meet the Press” on Sunday. “I believe that two months is just kicking the can down the road. The American people are tired of that. Frankly, I’m tired of it.”

But Senate Majority Leader Harry Reid (D-NV) showed no signs of giving in.

“If Speaker Boehner refuses to vote on the bipartisan compromise that passed the Senate with 89 votes, Republicans will be forcing a $1,000 tax increase on middle-class families on January 1,” Reid said in a written statement shortly after Boehner’s appearance.

A senior Senate Democratic aide said Sunday afternoon that Reid had no plans to appoint senators to a conference.

Despite the harsh initial reaction to the Senate’s actions, the situation in the House remained fluid, and it was possible the Republican-run chamber might eventually accept the Senate bill, or something close to it.

The office of Majority Leader Eric Cantor (R-VA) announced late Sunday that the House would vote on a motion to concur in the Senate amendment to the bill Monday evening. The announcement advised House members that “additional votes related to H.R. 3630 are possible.”

After first criticizing the Senate bill as a half-measure, House Minority Leader Nancy Pelosi (D-CA) came out in strong support of it Sunday, joining with Reid to put pressure on House Republicans.

At the same time, Senate Minority Leader Mitch McConnell (R-KY) aligned himself with Boehner.

“The best way to resolve the difference between the two-month extension and the full-year bill, and provide certainty for job creators, employees and the long-term unemployed, is through regular order, as the Speaker suggested,” said Don Stewart, a McConnell spokesman, in an email Sunday.

Also on Sunday, Boehner said common ground was in reach and suggested that a path forward existed if Democrats would reconsider the version of the payroll tax extension the House passed December 13. In particular, Boehner pointed to a House provision to relax regulations on industrial boilers and said it was offset “with reasonable reductions in spending.”

A Political Deal

Under scrutiny is a Senate compromise that extends a tax break only through February and with it a partisan debate that seems tailor-made for the 2012 elections.

For a brief moment last week, Republican and Democratic leaders in the Senate stopped launching rhetorical jabs at each other and started negotiating. They reported progress and called each other friends. But their ultimate solution was one that would simply allow them to resume their arguments when the 112th Congress returns for its second session.

The deal hatched by Reid and McConnell would have tangible consequences for a large number of people across the country.

By keeping the employee share of the Social Security payroll tax at a reduced 4.2 percent, it would prevent an effective tax increase on approximately 160 million workers. It would also continue jobless benefits that are good for up to 99 weeks in states with high unemployment. And it would avoid a scheduled drop in the Medicare reimbursement rate for physicians.

All of those provisions would expire after February 29. Though frustrating to many lawmakers, the short-term deal was nonetheless welcomed by some Democrats, who sensed a political advantage in their push, against Republican resistance, to continue the payroll tax cut for low- and middle-income earners and raise taxes on millionaires.

Among those praising the agreement was President Obama, who argued that a long-term agreement should be a “formality” next year.

Republicans were able to tout their own victory in the Senate package — a provision that would require Obama to decide within 60 days whether to sign off on construction of the Keystone XL oil pipeline from Canada to the Gulf of Mexico.

Just as Democrats have dared Republicans to reject another payroll tax cut extension, Republicans say Obama would harm his re-election chances by blocking the pipeline project, which is disliked by environmental groups.

“I think we accomplished a lot by getting the deal that we got,” Senator Johnny Isakson (R-GA) said December 17. “We’re not quitting and leaving. We got the deal that we wanted to get to get us back to next year.”

Both parties, in effect, could use the legislation to amplify their economic messages during the campaign season, with Democrats standing behind traditional fiscal stimulus measures and Republicans trying to relax environmental regulations and further exploit natural resources.

Calling It Quits

Less than 24 hours after Senate leaders announced their compromise, the chamber overwhelmingly approved it.

Not every senator was happy about returning to the same fight in less than two months. But after passing a disaster relief bill (H.R. 3672) and fiscal 2012 spending legislation (H.R. 2055), lawmakers were giving each other hugs on the Senate floor and saying their goodbyes in anticipation of a monthlong winter recess.

Their attitude was perhaps a little premature. A day earlier, Boehner had essentially guaranteed that the House would make changes to a Senate bill that would only extend the payroll tax cut for two months.

On the afternoon of December 17, House Republicans held a private conference call and roundly condemned the Senate bill. According to participants, they voiced frustration at the Senate for taking the easy way out with weeks to go before the tax cut and other programs run out.

Some of the usual conservative critics had little to say because “the anger was coming sufficiently from other parts of the conference,” a veteran House aide said.

In fact, a Senate leadership aide said December 16 that Reid and McConnell had been close to reaching a long-term agreement last week and probably needed only a few more days to complete one.

Talks were abandoned, and a short-term deal accepted, because of “member management,” the aide said — senators were tired of waiting around while leaders negotiated and were eager to return home for the holidays.

Both parties and both chambers are not immune from the charge that they dragged their feet in dealing with the expiring payroll tax cut, which was enacted last December as part of a broader tax package (PL 111-312) and was set to expire after one year.

While the Senate voted repeatedly on bills that would extend the tax break, the measures were largely written to draw political contrasts and none came close to garnering the 60 votes necessary for passage.

For its part, the House waited until December 13 to vote on legislation that would extend expiring programs through 2012. A full day then passed before Reid and McConnell began to discuss their options, according to leadership aides from both parties. Boehner decided to stay out of the talks and let the Senate work out its differences on its own.

On the morning of December 15, Reid and McConnell reported that they were making progress toward a deal. Behind closed doors, they had tentatively agreed to whittle the House package from one that would cost $200 billion over 10 years to one that would cost approximately $160 billion. To accomplish that, they would extend the payroll tax cut and some version of long-term jobless benefits through mid-November rather than the end of the year.

In the view of Republicans, this would make it less likely that the payroll tax cut would be extended again because it would not be linked to other, larger tax cuts that expire in 2013. A shorter extension would also help Democrats because it would mean they would have to accept fewer spending cuts to pay for it.

Leadership aides said the negotiating parties were able to find a little more than $100 billion in “easy” offsets.” But they were having trouble finding other measures that would keep the package deficit-neutral, as Boehner and others had demanded.

In the end, they settled on a small bill that would reduce the budget deficit by approximately $3 billion over a decade, according to scorekeeping by the Congressional Budget Office (CBO).

Extending the payroll tax cut, jobless benefits and Medicare reimbursements would cost about $20.2 billion in lost revenue and $12.5 billion in additional spending, almost all of which would be incurred in fiscal 2012, according to CBO estimates.

That cost would be offset by increasing fees charged by Fannie Mae and Freddie Mac for guaranteeing loans purchased in the secondary mortgage market — a move that is projected to raise $35.7 billion over 10 years.

Ben Weyl, Richard E. Cohen and Alan K. Ota contributed to this story.

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