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Congress set to end payroll tax fight

December 23, 2011|By Lisa Mascaro, Washington Bureau
  • Speaker of the House John Boehner announces a deal on the payroll tax cut at the U.S. Capitol Dec. 22, 2011 in Washington.
Speaker of the House John Boehner announces a deal on the payroll tax cut… (Chip Somodevilla / Getty…)

The last partisan standoff of the year could come to a close Friday morning as Congress is set to approve a short-term extension of President Obama's payroll tax cut.

Lawmakers are not being called back to the Capitol for the vote. Rather, the package to extend the tax break, which expires Dec. 31,  is expected to be approved in a swift session -- if no one objects.

House Speaker John A. Boehner agreed to compromise after the GOP's resistance became politically unsustainable. Republican rank-and-file members opposed the two-month continuation of the tax cut, risking a $40-a-paycheck tax hike for average workers in the New Year.

Whether any one renegade lawmaker would tank the deal, which must clear both the House and Senate, was unclear. Lawmakers were grumbling over the compromise. But they were given no opportunity to question Boehner, who took an unusually firm approach with rank-and-file members during a conference call Thursday evening, according to those familiar.

One freshman Republican expressed the disappointment and frustration the new lawmakers feel with the deal.

"The House has caved yet again to the president and Senate Democrats," said Rep. Tim Huelskamp of Kansas. "The Republican majority would not exist if not for the conservative freshman class of 2010. We were sent here with a clear set of instructions from the American people to put an end to business as usual in Washington, yet here we are being asked to sign off on yet another gimmick. No wonder the American people are left with a bad taste in their mouths when it comes to Congress."

The package will extend the tax break and also ensures long-term unemployment benefits will continue and doctors who treat Medicare patients do not see a pay cut.

Obama welcomed the deal. Democrats led an orchestrated campaign to highlight the GOP opposition, and the House Republicans became increasingly isolated as their stance drew criticism from within the GOP.

The way out of the impasse was offered by Sen. Mitch McConnell of Kentucky who suggested the contours of a resolution.

"In a year of divided government taken too far, Congress is thankfully going out on a bipartisan note," said Sen. Charles Schumer (D-N.Y.).

Yet so little trust remains after the year of partisan brinkmanship that the Senate refused to approve the deal until it cleared the House on Friday.

The toll the standoff has taken on the GOP leaders was clear and the speaker appeared visibly worn down as the deal was being struck.

Republicans had never fully warmed to the tax cut, which they doubt will prop up the struggling economy. The tax cut has been in place all year and shaves 2 percentage points off the payroll tax workers pay into Social Security. Mainstream economists say it will help maintain growth in 2012.

Republicans also doubt that revenue lost to the retirement fund will be replenished with future budget offsets.

The GOP rejected Democrats' initial proposal to pay for the costs with a tax on incomes beyond $1 million. Instead, they approved a bill that covers costs with spending cuts to domestic programs the Democrats found objectionable.

Talks to find a compromise broke down over how to pay for it, leaving the Senate to approve the shorter two-month package. Consensus was found by instituting a fee on home loans backed by the government-sponsored lenders.

Republicans had rejected that approach earlier this week, saying the stopgap measure breeds uncertainty for businesses. Even the inclusion of a GOP-backed provision to expedite a review of the controversial Keystone XL pipeline that Obama had postponed was not enough to win their votes.

In striking the deal late Thursday, Boehner won a concession to add a provision that could make it easier for businesses to comply.

Senate Democrats also agreed to appoint conferees to a committee to formally continue negotiations on a full-year extension -- an important concession for newer lawmakers who wanted a return to the traditional way of legislating.

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