Payroll-Tax Cut Backup Plan Prepared in Case Talks Fail

Uploaded by 8033050 at GMT:2012-02-03T21:15:18
Job seekers at a career fair sponsored by National Career Fairs in Houston on Jan. 27, 2012. Photographer: Aaron M. Sprecher/Bloomberg

Senate Democrats are devising a backup plan to extend a payroll tax cut and emergency unemployment benefits that are set to lapse in coming weeks if negotiations with the Republican-controlled House don’t lead to a deal, said Majority Leader Harry Reid.

“Republicans continue to drag their feet” in House-Senate conference talks on extending the tax cut, expanded jobless benefits and a provision to prevent a 27 percent drop in Medicare reimbursement for doctors, Reid said today on a conference call with reporters. In December, Congress extended the benefits for two months past a Dec. 31 expiration when lawmakers couldn’t agree on how to finance the provisions for 12 months.

Congress needs “to move quickly to extend the payroll-tax cut to make sure” workers don’t “get a tax increase,” said Reid, a Nevada Democrat. Unless Congress acts by Feb. 29, the payroll tax for workers would increase by 2 percentage points.

Allowing the tax break to lapse or long-term jobless benefits to end would undermine the nation’s economic recovery, Reid said. Even with the drop in the jobless rate from 8.5 percent to 8.3 percent announced today, “the worst thing we could do now is to stop our effort to create jobs,” Reid said.

The House-Senate negotiators “understand there is a backup plan” being drafted by Senate Democratic leaders, Reid said. “If we have to put it forward, we will.”

Covering the Cost

Reid declined to say how the package would be financed, saying, “We are not going to discuss how we are going to pay for it.”

Republicans signaled in the House-Senate talks that they will continue to seek restrictions on Obama administration initiatives, including preventing the Environmental Protection Agency from issuing rules on air pollution from industrial boilers.

Representative Chris Van Hollen, a Maryland Democrat, said negotiators plan three public meetings next week. He told reporters he doesn’t believe conferees are getting any closer to an agreement on how to pay for the payroll tax cut.

“We’ve not agreed on offsets,” Van Hollen told reporters. “That doesn’t mean we won’t be able to find them.”

House Majority Leader Eric Cantor of Virginia accused Senate Democrats of stalling the negotiations. House Republicans “are ready to make sure we resolve the issue of the payroll-tax holiday extension right now,” Cantor said in an exchange on the House floor with second-ranking Democrat Steny Hoyer of Maryland.

‘Off the Dime’

After Hoyer called for quick action, Cantor said Hoyer “should direct his urgency toward the majority leader in the Senate to see if we can get this off the dime” so Congress can “send a very certain signal” to workers “that their taxes will not go up.”

Negotiators are not much closer to resolving disagreements over extending the emergency unemployment benefits, said Van Hollen and Democratic Representative Xavier Becerra of California.

Republicans are seeking to cut maximum benefits from 99 weeks to 54 weeks in states hardest hit by joblessness. They also want to let states require drug tests for people seeking benefits, and require high school dropouts who qualify for jobless benefits to work toward a general education diploma.

Becerra said in an interview today that an unemployment proposal this week by Senate Democrats addressed minor items, including authority for states to collect overpayments, though not “first tier” issues such as the length of benefits or whether to include the changes Republicans are pushing.

The office of Representative Dave Camp, a Michigan Republican and chairman of the conference panel, said the next conference meeting will be Feb. 7.

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