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Payroll Tax Cut Fight: House GOP Leadership Offers 10-Month Extension Without Offsets

John Boehner Eric Cantor

First Posted: 02/13/2012 2:37 pm Updated: 02/13/2012 4:00 pm

WASHINGTON -- House GOP leaders announced Monday they were putting forward a "backup plan" that would extend the payroll tax cut for 10 months, while cleaving it from a similar extension of unemployment insurance benefits and what's known as the "doc fix," a measure needed to prevent dramatic cuts in Medicare reimbursements. The plan would not be offset by cuts elsewhere, the announcement said, meaning the cost of the tax cut would be added to the deficit.

The announcement, made quietly on a day Washington is digesting the president's budget proposal, is a stark reversal. Senate Minority Leader Mitch McConnell (R-Ky.) took the floor shortly after the statement was emailed to reporters and spoke only of the budget.

"Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue regarding offsets, unemployment insurance, and the 'doc fix,'" said Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.) and Majority Whip Kevin McCarthy (R-Calif.) in a statement.

The House leaders said in the statement that the plan was not their "first choice."

“If Democrats continue to refuse to negotiate in good faith, Republicans may schedule this measure for House consideration later this week pending a conversation with our members. 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."

A Democratic aide familiar with the talks said that Republican leadership had privately conceded the issue in negotiations on Friday, though word had not leaked out over the weekend.

"Whether the payroll tax cut moves separately or as part of the larger package, the Republicans have already said they will give up trying to pay for it by slashing medicare or with other harmful cuts," said the aide.

Another Democratic aide familiar with the negotiations suggested Republicans ought to vote on their offer now and send it to the Senate. "Republicans offered to pass the payroll tax cut without offsets over the weekend, which we considered a major breakthrough. This is just an acknowledgment of their offer. They should send it on over," he said.

President Barack Obama signed a two-month extension of the payroll tax cut, along with unemployment benefits and the Medicare "doc fix," in December. The current deal is set to expire on Feb. 29.

A senior Republican aide emphasized that the plan stems from frustration on the GOP side, and that it isn't yet a done deal.

"It's a possible option to try to pressure Democrats into negotiating in good faith," the aide said.

The GOP leaders' statement noted that the offer was pending discussions from their caucus, which rebelled the last time the leaders tried to cut a payroll deal.

That led to the ugly pre-Christmas standoff and an eventual Democratic victory. Carving the payroll tax out of the equation would at least prevent a similar debacle for the GOP, leaving unemployment insurance and the "doc fix" as the remaining points of contention.

UPDATE: 3:25 p.m. -- White House Press Secretary Jay Carney dodged several questions during Monday's daily briefing about whether President Barack Obama could support the idea of decoupling unemployment insurance from the payroll tax cut extension.

"It's a hypothetical proposal put up that they said they might do," Carney said of the GOP plan. "Let's just see how this process plays out."

Carney added that the unemployment insurance extension and the "doc fix" are "equally important" as the payroll tax cut extension.

Ryan Grim contributed reporting.

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