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Payroll Tax Cut Extension: House, Senate Pass Compromise Measure [UPDATED]

Payroll Tax

First Posted: 02/17/2012 11:45 am Updated: 02/18/2012 11:40 am

WASHINGTON -- Congress passed the extension of the payroll tax holiday Friday, voting overwhelmingly to continue the 2 percent break and extend emergency unemployment benefits for the rest of the year.

The $152 billion measure also prevents a change in Medicare funding formulas that would have slashed payments to doctors by about a third.

That the bill passed easily in the House and Senate after months of heated, rancorous debate was a reflection of the pain the process had inflicted, especially on Republicans.

The GOP had at first opposed any extension that was not paid for, and the rank-and-file Tea Party members even rebelled at a deal cut in December by their leaders. They later capitulated in an embarrassing string of events that led to the current two-month extension, which the new bill will extend further.

And even this deal was only made possible after House leaders offered yet another about-face, in allowing the $100 billion cost of the tax break to be added to the deficit. The "doc fix" and the unemployment benefits are funded by cutting federal pension benefits, selling off public spectrum for broadcasting, and making a number of health care cuts.

Passage came with a heavy dose of dissatisfaction on both sides, however, with Democrats displeased by the cuts and conservative Republicans angry that the debt would increase.

"This represents a victory, to have a payroll tax cut for the middle class," said Minority Leader Nancy Pelosi (D-Calif.), before complaining that the $52 billion in cuts in the bill came from health care and federal employees instead of from the wealthy.

She vowed that Democrats would try again to make the rich pay more.

"There's a ground truth out there from the public, common sense coming up for the ground, that in order for us to meet our needs and also reduce the deficit, there should be a surcharge on the wealthiest people in our country, people making over $1 million a year," Pelosi said. "That was not contained in this bill, but it will be part of the debate going forward."

Democrats were especially aggrieved that new federal workers would have to contribute about 3 percent to their own pensions, up from .8 percent now, in order to raise half of the $30 billion cost of the unemployment benefits extension. Many noted that between savings already extracted and some proposed, the federal workforce could provide more than $130 billion of the country's deficit cuts.

"It is not fair to ask only one group in America to make a sacrifice," said Rep. Gerry Connolly (D-Va.), whose district includes many federal workers. "Shared sacrifice should be shared sacrifice."

Many Republicans objected to the deficit spending, but most held their noses and backed the deal, citing the off-sets for parts of it and new restrictions on unemployment benefits, including allowing drug-testing of recipients.

"It's not perfect, but it is certainly the right thing to do now," said Rep. Fred Upton (R-Mich.), one of the House negotiators. "We need to do it now to offer a measure of relief for those in need."

The Senate passed the bill 60 to 36, in spite of similar objections on both sides, as well as complaints that the bill would begin to unravel the Social Security safety net because it allows deficit spending to be linked to the program for the first time.

One provision that it also includes -- which some lawmakers pointed to as a reason to vote for the bill in spite of their complaints with other parts -- is a $7 billion fund to build a nationwide radio network for emergency responders, fulfilling one of the last recommendations of the 9/11 Commission.

This has been updated to include the Senate passing of the bill.

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