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Sam Stein

Political Reporter, The Huffington Post

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Payroll Tax Cut Deal: House-Senate Panel Reaches Tentative Pact On Payroll Tax Cut Extension

Posted: 02/14/12 06:55 PM ET  |  Updated: 02/15/12 08:00 PM ET

Payroll Tax Cut Deal
A view of the Capitol building's rotunda on Capitol Hill January 24, 2012 in Washington, DC. (Photo by Brendan Smialowski/Getty Images)

WASHINGTON -- A tentative deal struck by lawmakers Tuesday night may put off what seemed, just days ago, to be a highly contentious rerun of a debate completed in December.

The deal surrounds a 10-month extension of the payroll tax cut, unemployment insurance and the so-called doc-fix, which keeps payments to physicians participating in Medicare at competitive levels. Under the contours of the deal, as outlined by several sources, the cost of extending all three until the end of 2012 would be about $50 billion. The price is that low because lawmakers relented on a previous insistence that the payroll tax cut extension be covered in full -- saving them from having to find $100 billion elsewhere.

According to a Senate Democratic aide, to pay for the cost of extending unemployment insurance (at a price of $30 billion), the government would hold a spectrum auction to sell wireless bandwidth and would increase federal employee contributions to pension plans.

The aide said the maximum duration of unemployment benefits would technically be 89 weeks. That level, however, would apply only to the hardest hit states. The aide conceded that the more accurate number for maximum benefits was 75 weeks. But even this figure was contested by a Republican congressional aide, who said that, "the maximum number of weeks of unemployment benefits in most states will be reduced to 63 weeks." As of 8 p.m. Tuesday night, the difference in numbers remained unexplained.

The unemployment extension also is coupled with a voluntary "Georgia Works" program, which allows businesses to train people receiving unemployment benefits for a number of weeks without having to pay them. Republicans had pushed for a permanent program along these lines. Democrats, led by President Barack Obama, held to their preferred policy. In addition, Democrats were able to beat back efforts to make unemployment recipients pursue a GED or undergo drug testing.

The Republican aide familiar with the deal said, "Those receiving unemployment benefits must be searching for a job," and that states that currently "drug-screen workers seeking a job that requires a drug test" will be allowed to continue doing so. In other words: federal lawmakers allowed for a continuation of state laws.

As for the doc-fix, which prevented a major cut in payments to doctors serving Medicare beneficiaries, the cost would be covered by hospital fees, according to the Democratic aide. Benefits to Medicare recipients won't be touched.

Before the ink was even dry on the deal, the spinning had commenced. The Republican aide noted that, "There are no job-killing tax hikes to pay for more government spending."

The Democratic aide conceded that forcing federal workers to pay more for their pensions was "something Republicans will crow about." However, the aide added, "on the grand scheme of things it is swallow-able."

Meanwhile, as the Associated Press reports:

Rep. Mike Simpson, R-Idaho, said it was described to lawmakers as a tentative agreement.

The payroll tax cut and renewing jobless benefits were key planks in Obama's jobs program, which was announced in September. The payroll tax cut benefits 160 million Americans and delivers a tax cut of about $20 a week for a typical worker making $50,000 a year. People making a $100,000 salary would get a $2,000 tax cut.

The deal would not only be a win for Obama but would take the payroll tax fight -- which put Republicans on the defensive -- off the table for the fall election campaign.

"The mood is to get it off the table," freshman Rep. Dennis Ross, R-Fla., said. "We've got to move on to another issue."


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