House scuttles deal on payroll tax cut, unemployment

By Karoun Demirjian

Monday, Dec. 19, 2011 | 12:17 p.m.

WASHINGTON — The House GOP is pushing back against the compromise payroll tax and unemployment insurance plan passed by the Senate over the weekend, but Sen. Harry Reid is refusing to renegotiate the bipartisan compromise before Congress goes home for the holidays.

If someone doesn’t blink, that means Nevadans will see their take-home pay fall, and anyone dependent on unemployment insurance who has drawn more than 26 weeks’ worth will see their eligibility expire in the new year.

It appeared to be a done deal Saturday, when the Senate passed a two-month extension of the payroll tax cut (which has kept that tax rate, usually 6.2 percent, at 4.2 percent for the past year) and emergency and extended unemployment benefits by a vote of 89 to 10. Both Nevada Sens. Reid and Dean Heller voted for the bill, and praised its passage.

But the compromise began to unravel soon after: Saturday afternoon, House Republicans lodged their complaints with Speaker John Boehner on a conference call, and Sunday morning Boehner declared the two-month patch dead on arrival in the House.

“I and our members oppose the Senate bill,” he said Sunday morning on NBC’s “Meet the Press,” complaining that the short-term nature of the bill was what was objectionable. “How can you do tax policy for two months?...Two months is just kicking the can down the road.”

Maybe so. But lawmakers had been locking horns for weeks over how to pay for a year-long extension of the payroll tax cut alone -- not to mention the extension of unemployment benefits -- and couldn’t come up with a mutually agreeable solution.

By Friday evening, Reid and Senate Republican Leader Mitch McConnell had abandoned their plans for a far-reaching deal, settling instead on the two-month package so that that both employed and unemployed workers wouldn’t take a financial hit while Congress was on vacation.

“I have always sought a year-long extension. I have been trying to forge one for weeks, and I am happy to continue negotiating one once we have made sure middle-class families will not wake up to a tax increase on January 1st,” Reid said in a statement Monday. “So before we re-open negotiations on a year-long extension, the House of Representatives must protect middle-class families by passing the overwhelmingly bipartisan compromise that Republicans negotiated, and was approved by 90 percent of the Senate.

“My House colleagues should be clear on what their vote means today,” Reid also said. “If Republicans vote down the bipartisan compromise negotiated by Republican and Democratic leaders, and passed by 89 senators including 39 Republicans, their intransigence will mean that in 10 days, 160 million middle class Americans will see a tax increase, over two million Americans will begin losing their unemployment benefits, and millions of senior citizens on Medicare could find it harder to receive treatment from physicians.”

While the core of this bill is an extension of the payroll tax cut and unemployment benefits, the package also includes a correction to Medicaid reimbursement rates and a mandate to President Barack Obama to issue a decision on Keystone XL, a proposed oil pipeline running from Canada to the Gulf Coast, in the next two months as well.

That last bit was a critical piece of achieving a compromise: Republicans have united around that project as a guaranteed job-creator, and last week, Republican leaders stated unambiguously that it was the key to getting their support on a payroll tax bill: no Keystone, no compromise.

After Saturday morning’s vote, leading Democrats spun the concession as “giving them the sleeve off a vest,” because Obama could simply choose not to approve the project.

Sen. Charles Schumer went on to add that he was “surprised” that the Republicans had not seized the moment to negotiate a longer-term compromise.

“The Republicans will not have the leverage of either shutting down the government or raising the debt ceiling,” Schumer said of Republicans’ bargaining position in February 2012, when lawmakers would have to come up with a further extension of the payroll tax cut and unemployment benefits, should the 2-month patch pass. “It’s a fight we welcome.”

Either Schumer was right to be surprised, or Republicans were taking notes, because within 24 hours, House Republicans were pushing back against the 2-month compromise and arguing for a longer-term bill.

Technically, they still have time to hash out a compromise. Two weeks remain, even if it means missing their holiday break -- which most Senate members already started.

But pulling the Senate back from their time away will now mean getting the unanimous consent of all its members to return to Washington -- and there are a few who oppose the payroll tax cut.

Republicans have already begun to use that situation to call the bluff of Reid and Obama, who pledged that they would not go on vacation until they could guarantee that middle class Americans’ taxes would not be affected in the new year.

“We’ve got two weeks to get this done; let’s do it the right way,” Boehner said.

But Reid argues Boehner is picking an artificially complicated solution to a simple problem. “Instead of threatening middle-class families with a thousand-dollar tax hike, Speaker Boehner should bring up the bipartisan compromise that Senator McConnell and I negotiated,” Reid said. “I would hate to think that Speaker Boehner is refusing to act on this bipartisan compromise because he is afraid it will actually pass, but I cannot imagine any other reason why he would not bring it up for a vote.”

The House is scheduled to vote on the Senate-passed payroll tax cut and unemployment insurance measure after House Republicans meet for a long conference session tonight.