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Reid Seeks to Break Impasse on Payroll Tax Cuts, Unemployment

Harry Reid, Senate Majority Leader. Photo: Chip Somodevilla/Getty Images
Harry Reid, Senate Majority Leader. Photo: Chip Somodevilla/Getty Images

Dec. 5 (Bloomberg) -- Senate Majority Leader Harry Reid plans to offer a new proposal to extend payroll tax cuts and unemployment benefits that are set to expire this month.

Senate Budget Committee Chairman Kent Conrad of North Dakota said yesterday on “Fox News Sunday” that fellow Democrat Reid will release a compromise plan today in an effort to break a political deadlock on the measures.

“He indicated to me it will be paid for,” Conrad said, adding that it’s a compromise between plans voted on last week. “It will be paid for in a way that’s credible and serious.”

Republicans and Democrats agreed on Sunday television talk shows that Congress is likely to reach a deal to extend the benefits. Unless lawmakers act, legislation that lowered the employee portion of the Social Security payroll tax to 4.2 percent for 2011 from 6.2 percent will expire Dec. 31.

“We are still reviewing the details with our caucus,” Adam Jentleson, a spokesman for Reid of Nevada, said in an e-mail yesterday confirming Conrad’s remarks.

Senator Tom Coburn, an Oklahoma Republican, said no agreement exists on how to pay for the benefits. “Nobody is making hard choices now,” he said on “Fox News Sunday.” “What they are doing is promising a benefit and no pain now. It always comes later.”

No Information

Senate Republican leader Mitch McConnell’s staff said yesterday he had received no information on the Reid plan.

“It will be a whole lot easier to form an opinion about the ‘compromise’ when we actually see it,” McConnell spokesman Don Stewart said in an e-mail.

President Barack Obama is urging Congress to extend the payroll tax cut, saying that letting it expire would be a “significant blow” to the economy. Obama said in his most recent weekly radio and Internet address that the tax cut saves the typical middle class family $1,000 a year.

“Now is the time to step on the gas, not slam on the brakes,” Obama said. “Unfortunately, too many Republicans in Congress don’t seem to share that same sense of urgency.”

The U.S. jobless rate fell to 8.6 percent in November from 9 percent the month before after employers added 120,000 jobs and 315,000 Americans left the labor force. The unemployment rate was the lowest since March 2009.

Deal Predicted

Massachusetts Representative Barney Frank, the top Democrat on the House Financial Services Committee, said “bad things will happen if nothing happens.” Speaking on ABC’s “This Week,” Frank said, “I think there will be a deal.”

Republicans and Democrats have been trading blame for the impasse. Democrats say Republicans refuse to budge on their opposition to tax increases as a way to pay for the benefits, while Republicans say Democrats won’t agree to cut entitlement programs including Medicare.

The Senate rejected last week Democratic and Republican proposals to extend the payroll tax cut for a year. The Democrats’ plan would have expanded the cut to employers and imposed a 3.25 percent surtax on annual income exceeding $1 million as a way to pay for it. Democrats also want to extend unemployment benefits set to expire Dec. 31.

Republicans won’t agree to any proposal that increases the size of the national deficit, said Representative Fred Upton, a Michigan Republican.

“The keys, particularly from the Republican side, are that these things have to be paid for,” Upton said, speaking on Bloomberg Television’s “Political Capital with Al Hunt” airing during the weekend.

To contact the reporter on this story: Lorraine Woellert in Washington at

To contact the editor responsible for this story: Mark Silva at

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