Thursday, December 22, 2011

GOP CAVES

WASHINGTON -- Ending a dramatic political stand-off, House Republican leaders agreed on Thursday to pass a Senate-endorsed short-term extension of the payroll tax cut in return for House-Senate negotiations on a year-long package.

The House could vote on the bill as soon as Friday at 10 a.m., a House GOP aide confirmed. The bill would come up under unanimous consent, which means it could pass on a voice vote without requiring members to be present. Under that scenario, the Senate could take up the bill and pass it as soon as Friday as well.

The agreement ensures that a 2 percent tax break for about 160 million people will not expire on Jan. 1, and that Medicare payments will not be slashed for doctors. Emergency unemployment benefits also will continue.

House GOP leaders had been adamant that they had to have a year-long extension, arguing that a two-month version would create economic uncertainty. They reaffirmed that position as recently as Tuesday morning.

But pressure to secure the break kept rising, with everyone from Senate Republicans to the Wall Street Journal editorial page warning that their holdout was damaging the party's image. On Thursday, Senate Minority Leader Mitch McConnell (R-Ky.) became the latest to try and nudge House Speaker John Boehner (R-Ohio) into backing down, urging him to take the two-month deal in exchange for a guarantee from Senate Majority Leader Harry Reid (D-Nev.) that he would appoint conferees to hash out a longer package.

"I think the general mood was that this was bungled from early on," a GOP source said. "After what the Wall Street Journal and [Karl] Rove said, it became clear that Obama had the upper hand.

"When people are living from paycheck to paycheck, it's tough to take the longview talking about trillion-dollar deficits," the source added. "The leadership simply didn't understand that."

House GOP leaders called a conference call with members for around 5 p.m. Thursday to lay out the agreement, a source said.

While the final deal represents a fairly stunning defeat for House GOP leadership, on strict policy terms, the Republican Party was able to secure major concessions. Democrats had initially wanted a surtax on income above a million dollars as a means for paying for the measure. That was scrapped. The president had also insisted that he would oppose any payroll tax extension that forced his administration to build the Keystone pipeline -- which would carry crude oil from Canada through the United States. The final bill doesn't force construction but it does require that a decision be made within 60 days. Those victories ended up obscured by the fumbled effort, on the part of the House GOP leadership, to get even more concessions (which they hoped to do by holding out for a year-long bill, to which they could attach even more spending cuts).

While broad outlines of the deal were emerging, its passage was not necessarily a sure thing. Republicans in the Senate had been confident that their agreement reached last Saturday would be approved. Instead, House GOP rank and file rebelled when Boehner presented it in a conference call.

Still, with the Republican Party recovering from a week-long pummeling for rejecting the extension of the tax holiday, this agreement seemed more likely to stick -- especially after several House Republicans had already begun to publicly call on their fellow lawmakers to accept the Senate bill.

Critical for the deal was the resolution of a highly technical payroll administration matter. The final agreement will eliminate a Senate provision that had irked the National Payroll Reporting Consortium. In order to prevent high earners from taking undue advantage of a reduced rate that might last just two months, the Senate bill would have required employers to pay at the full 6.2 percent rate on income above $18,350 during that time.

Workers pay Social Security taxes only on their first $110,000 worth of annual income. If someone earned more than one-sixth of that amount in January and February and the payroll tax cut expired in March, the thinking went, high earners could fulfill their yearly obligation to Social Security at a lower rate than everybody else, and get a break worth some $2,000 in only two months.

Citing the consortium's letter, Republicans had called the bill totally unworkable, though consortium president Pete Isberg told HuffPost it would have been difficult but not impossible for employers to implement the new wage cap.

"It's not impossible, it's just it would be very disruptive and costly for lots and lots of businesses," Isberg said.

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