Congress Clears Final Stumbling Block on Payroll Package

UPDATE: And it looks like they have a deal.

The Washington Post reports that congressional negotiators hammered out the final details early Thursday of a $150 billion economic package that would extend the payroll tax cut holiday and unemployment benefits through the end of 2012, as well as implement the so-called Medicare "doc fix". A vote could come as soon as Friday.

The last major bone of contention between the two parties was reportedly settled just after midnight, and top negotiators for each side announced Thursday morning that they were confident there were the votes to pass the measure in both chambers.

Politico with more details on the final compromise:

After both sides said there was an deal Wednesday afternoon, a snag emerged in the evening over a proposed increase in pension payments for federal employees that would raise $15 billion to pay for part of the agreement. A deal was reached when negotiators agreed to include language forcing new federal hires to pay more into their pensions than current workers.

The deal is seen overall as a victory for Obama and Democratic legislators, although the package is just one third the size of the president's original jobs plan proposed in September.

Wednesday, Feb. 15: The tentative deal to extend the payroll tax cut and jobless benefits through December could get final congressional approval as soon as Friday, presuming nothing is changed. 

The deal will extend the 2 percentage-point payroll tax break without covering its cost of nearly $100 billion. House Republicans had previously insisted that any extension of the tax break be paid for. Instead, the cost will add to the deficit.

However, the compromise includes a few concessions to Republican legislators: Extended unemployment benefits will be paid for under the new bill, for example, and various other tax breaks that expired at the end of the year will not be extended.

Republican leaders tried to sell the tentative deal to GOP lawmakers late last night, to mixed results, as Bloomberg reports. But with a quickly approaching deadline and many Republicans eager to avoid another public backlash over what are seen to be middle class tax cuts, lawmakers may have little choice but support the policy.

Tues. Feb. 14, 4:13 p.m. : Love must truly be in the air.

Politico reports that House and Senate leaders are close to hammering out a sweeping compromise that would extend the payroll tax cut and jobless benefits for the rest of the year. The package would also include a key tweak to Medicare known as the "doc fix."

The apparent breakthrough came less than a day after House Republicans abandoned efforts to offset the cost of the payroll tax extension with other spending cuts.

Under the deal currently being hashed out by lawmakers, the payroll tax cut would be extended for 10 months at a cost of about $100 billion, which would be added to the deficit.

Unemployment benefits would also be extended for the next 10 months, and doctors with Medicare patients would avoid seeing their payments cut as a result of a tweak to Medicare law. Those two programs are expected to cost $30 billion and $20 billion, respectively, and would be paid for with cuts to the budget.

Tuesday, Feb. 14: It's a Valentine's Day miracle! OK, that may be overdoing it.

House Republican leaders announced this week that they are willing to sign off on a yearlong federal payroll tax holiday extension without demanding offsetting spending cuts, as they had repeatedly fought for during last year's partisan standoff over the extension.

The Washington Post reports that Speaker John Boehner and co. are willing to cave because they fear that they would be held responsible for the tax increase on 160 million workers that would result if the tax holiday were to expire, as it is set to do at the end of this month. A 10-month extension of the tax holiday is expected to cost about $100 billion.

The move would appear to avert a repeat of the congressional fight that dragged on at the end of last year over the tax holiday and how to pay for it. That said, this is Washington we're talking about, so no deal is done until it clears both chambers and is signed by the president.

The biggest hurdle facing the clean extension appears to be House Democrats. Nancy Pelosi and others are still pushing for a larger package that also includes an extension of unemployment benefits and a key Medicare tweak, and worry that passing the clean payroll extension would weaken their negotiating position on the other issues.