Congressional Republicans have a standard negotiating tactic, which has proven effective several times over the last year: hold the economy hostage until Democrats agree to capitulate on the major dispute of the day. The most notable example of this was last summer’s debt-ceiling fiasco.
But when it comes to the payroll tax break, the GOP simply couldn’t play the same game – Democrats never believed their opponents would support a middle-class tax increase in an election year, denying Republicans any leverage. Indeed, it was arguably the first time in this Congress where Dems felt like they had the upper hand – because they did.
Members of a House-Senate committee charged with writing a measure to extend a payroll tax reduction and provide added unemployment benefits reached a tentative agreement Tuesday evening, with Republicans and Democrats claiming a degree of political victory in a fight with significant election-year implications.
One day after House Republican leaders said they would offer a bill to extend the $100 billion payroll tax rollback for millions of working Americans without requiring spending cuts to pay for it, the Congressional negotiators struck a broader deal that would also extend unemployment benefits and prevent a large cut in reimbursements to doctors who accept Medicare.
A vote on the measure would most likely happen by Friday, when Congress is set to recess for a week.
The agreement is not yet final, and could still fall apart, but officials on both sides of the aisle appeared confident overnight that the deal would come together and reach President Obama’s desk no later than the weekend.
Democrats proceeded under the assumption that, as was the case in December, the GOP’s posture would change as the deadline drew closer. That’s exactly what happened, with Republicans growing anxious as the prospect of a tax increase on 160 million Americans – one that the GOP would be blamed for – grew more serious.
As work on the final agreement wraps up, the debate now turns to which side made the most concessions, and whether the deal is any good.
On the latter, most economists seem to agree that a lapse in the payroll tax would have dealt the burgeoning economic recovery a swift blow at an inopportune time. The same is true of extended unemployment benefits. To that extent, this agreement, if approved, will bring a sigh of relief to many concerned about 2012 economic growth.
On the former, both parties had to accept some compromises, but it was Republicans who’d already surrendered on the most contentious point: GOP leaders agreed on Monday to accept the payroll tax break without paying for it. Once this component was in place, the larger deal was much easier to strike.
For their part, Dems abandoned the goal of a surtax on millionaires and billionaires, and accepted alternate financing to pay for jobless aid and the Medicare “doc fix,” related to physician reimbursements. Unemployment benefits will be paid for through changes to federal pensions, while the Medicare portion will be paid for through cuts the White House had already proposed.
Republicans, meanwhile, wanted new education requirements and drug testing for beneficiaries, and both measures were scuttled. They also fought against the payroll cut itself, and gave in on this altogether.
One area to keep an eye on is the UI provisions. GOP officials fought to reduce the maximum eligibility from 99 weeks to 59 weeks, and Democrats countered with 93 weeks. This deal sets the new number at 73, though there will apparently be “tiers” affecting states with the most severe jobs crises.
Another procedural element to watch is how the deal advances: if it can be approved through the conference committee, the opportunity for amendments disappears and the process will move much quicker.
Overall, it’s an agreement that will likely be approved with significant Democratic support, which will be necessary since a large number of rank-and-file Republicans will see the deal as not nearly right wing enough.