February 16, 2012
Lawmakers Finalize Payroll-Tax Agreement
Deal Also Renews Expiring Jobless Benefits and Comes After Party Leaders Risked Collapse With Last-Minute Changes
WASHINGTON—Congressional negotiators working on a deal to extend jobless benefits and a payroll-tax cut say they have come to a deal, paving the way for a vote before the policies expire at the end of the month.
"We have reached an agreement," said Rep. Dave Camp (R, Mich.) shortly after midnight. "We're confident that this can be concluded."
Sen. Max Baucus (D, Mont.) said, "It's clear that we'll have a majority of conferees sign the conference report."
A tentative deal outlined earlier this week would extend the tax break, which reduces workers' payroll taxes to 4.2% from 6.2%, until year-end. It would also renew expiring jobless benefits but cut the maximum number of weeks. And it would adjust the Medicare payment system to avoid a 27% drop in physicians' fees.
But talks hit several snags. Lawmakers battled over a provision to raise money by auctioning off valuable broadband spectrum. That was resolved, but another problem emerged when Maryland's lawmakers, including Sen. Ben Cardin (D, Md.) and Rep. Chris Van Hollen (D, Md.), expressed frustration with a provision to raise funds by forcing federal workers, abundant in Maryland, to contribute more to their pensions.
A Senate aide said that Mr. Cardin—one of four Senate Democrats on the conference committee charged with producing a version of the package that can pass both House and Senate—had now agreed to support it. Under a last-minute deal, only new government employees will be subject to pension-contribution increases. A spokeswoman for Mr. Cardin didn't immediately respond to a request for comment.
The Senate's three Republican negotiators will not back the package, a Senate aide said. That does not undermine the agreement, but it could potentially pose complications for House Republicans, who will take a tough vote without the backing of some key counterparts in the Senate.
Rank-and-file GOP lawmakers already dislike the package because lawmakers did not find a way to offset the cost of extending cuts to the payroll tax. A spokesman for Senate Minority Leader Mitch McConnell (R, Ky.) had no immediate comment.
Both sides were under pressure to reach a deal late Wednesday because midnight was the deadline for a package that would enable lawmakers to vote Friday before leaving for a weeklong recess.
House Speaker John Boehner (R., Ohio) said earlier Wednesday that he expected to schedule a House vote on the deal this week. "We made a decision to bring members to the table so that the games would stop and we would get this work done," he said.
The costs of the payroll-tax cut would not be offset with spending cuts or revenue increases, in a major concession by Republicans, according to the framework being discussed earlier Wednesday. But the remaining parts of the package were to be funded by auctioning off spectrum, cutting the federal contribution to employee pensions and imposing spending cuts, including to President Obama's health-care program.
Negotiators during the day were still grappling with the plan to auction the broadband spectrum. Two Democratic aides said lawmakers found it might not raise as much money as they thought. Lawmakers were also debating a provision that could result in limits on the ability of AT&T Inc. to take part in the auction, since some Democrats fear the company could gain too much of the spectrum. AT&T declined to comment on the legislation.
These are relatively small cuts to a $930 billion law, but they are highly symbolic. Republicans have been promising to cut or kill the law since taking over the House in January 2011.
Republicans call the prevention fund, which funds items like immunizations and health screenings, a "slush fund." And they deride the Louisiana provision as "the Louisiana Purchase"—inserted, they say, to win the vote of Sen. Mary Landrieu (D., La.), a charge she has denied.
The cuts to the health law could make it easier for GOP leaders to sell the deal to their more conservative members. Democrats are unhappy with the idea of accepting a cut to the president's signature accomplishment, but they appeared willing to swallow it for the deal to go through.
Democrats say the prevention fund is key to the bill's attempt to spend health-care dollars more wisely, by preventing illness rather than treating it. And Louisiana officials say the state's Medicaid formula was unfairly low and had to be adjusted.
Economists were cautious in predicting what the deal's impact on the economy would be. But many have argued an expiration of the payroll-tax cut and jobless benefits would slow the U.S. economy's recent momentum.
One outcome of the deal would be to gradually reduce the maximum number of weeks of jobless benefits to 73 from 99, depending on a state's unemployment rate. That means some of the long-term unemployed would stop receiving benefits in coming months.
It wasn't immediately clear how many workers would be affected. George Wentworth of the National Employment Law Project, which advocates longer jobless benefits, said it appeared the deal would allow at least 500,000 workers to be phased out of jobless benefits by fall.
Republicans argue extended jobless benefits prolong unemployment by discouraging workers from aggressively seeking a job. Democrats say the benefits are a critical lifeline in a market where it's hard to find a job.