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Congress May Skip Payroll Tax Showdown This Time

Feb 15, 2012
Originally published on February 15, 2012 12:31 pm

Congress appears to have avoided another showdown over the payroll tax reduction that has been pumping billions of dollars back into the economy. There may even be a deal ahead on jobless benefits and payments to Medicare doctors.

The last time Congress extended the payroll tax holiday was in December, when it passed a two-month extension tied to two other measures. One extended unemployment benefits, and the second fixed a formula by which Medicare doctors are paid. The Medicare fix would stop big cuts in reimbursements for doctors.

But Democrats had rallied around the tax-cut extension and the jobless benefits. They had pushed for the three-part package since November.

"All three need to move forward — that's our position," House Minority Whip Steny Hoyer of Maryland said Tuesday. "Our concern is going to be that somehow they would deal with one-third of what we ought to do and leave the other two behind. We don't want to put at risk those who are unemployed and fear that they're going to fall off the unemployment rolls. And, we certainly don't want to put at risk Medicare availability for seniors."

But on the Republican side, the paramount goal was to offset any additional spending without cutting too deeply into defense.

"If this were something that I thought would really stimulate economic growth, then you don't have to pay for it," said Republican Sen. Jon Kyl of Arizona. "But the evidence is pretty clear that these kinds of one-time only or short-term stimulus, they're not really successful at putting people back to work."

That's essentially where it has all stood for weeks. One side argued: Pay for the tax cuts and unemployment insurance within budgets. The other side argued that they should be paid for later.

Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said both sides are right — sort of.

"Generally, unemployment insurance is found to be one of the things with the highest multiplier effects, or bang for buck, when it's put into the economy," she said.

That's because people on unemployment insurance are likely to spend their entire check, she said. But the payroll tax cut is different.

"The payroll tax cut is not so well targeted; it goes to people who need it and will spend it right away," she said. "It also goes to many people who don't, which means they'll pocket it, they'll put it in the bank. It's nice to have that extra money to save, but it doesn't do a whole lot to boost the recovery in the short term."

Then there was talk of something uncommon on Capitol Hill these days: compromise.

Speaker John Boehner, R-Ohio, first floated the trial balloon about a payroll tax cut that wouldn't have to be paid for, and that produced a response that isn't heard often from Democrats on Capitol Hill.

"I think Speaker Boehner is right," said Illinois Sen. Dick Durbin. "At this point, let us extend the payroll tax cut. But the last point I will make: The extension of unemployment benefits is of equal value to the economy and immeasurable value to those who are out of work and struggling to find a job."

Almost as Durbin was saying that, a compromise was beginning to take shape, with both parties taking part.

The tentative deal would have the payroll tax reduction — worth about $100 billion a year — added to the deficit. But the deal would find enough spending cuts to offset the cost of changes to unemployment insurance and the doctor reimbursement fix in the short run.

In a contentious closed-door meeting, House Republican leaders tried to sell the plan to those who remained unconvinced.

"We've got to be honest with the American people," said Florida Rep. Allen West. "We've got to be held accountable for some of the things we're doing that could have long-term ramifications. So I've got to think about this. I've got to pray about it tonight. But right now this doesn't look like a good deal for the American people."

But MacGuineas, with the Committee for a Responsible Federal Budget, said this is only one compromise among many that Congress will have to make, and soon.

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RENEE MONTAGNE, HOST:

A New York Times-CBS survey out yesterday said President Obama's approval rating is up to 50 percent. The approval rating of Congress is down to 10 percent. It's in that environment that lawmakers yesterday decided to bury their differences, at least for now.

Democrats are pushing to extend a payroll tax cut and resolve other key issues. Republicans don't want to do that without spending cuts, to keep from increasing the deficit. With a deadline approaching, though, they're trying to make a deal.

NPR's Sonari Glinton reports.

SONARI GLINTON, BYLINE: The last time Congress extended the payroll tax holiday was in December, when they passed a two-month extension tied to two other measures: one extending unemployment benefits, and a second fixing a formula by which Medicare doctors are paid. The doc fix is what stopped big cuts in Medicare reimbursements for doctors. But Democrats had rallied around the tax cut extension and the jobless benefits. They had pushed for the three-part package since November.

REP. STENY HOYER: All three need to move forward. That's our position.

GLINTON: That's House Minority Whip Steny Hoyer.

HOYER: So our concern's going to be that somehow, that would deal with one-third of what we ought to do, and leave the other two behind. We don't want to put at risk unemploy - those who are unemployed and fear that they're going to fall off the unemployment rolls, and we certainly don't want to put at risk Medicare availability for seniors.

GLINTON: But on the Republican side, the paramount goal was to offset any additional spending without cutting too deep into the fence. Here's Republican Senator Jon Kyl of Arizona.

SEN. JON KYL: If this were something that I thought would really stimulate economic growth, then you don't have to pay for it. But the evidence is pretty clear that these kinds of one-time-only or short-term stimulus - they're not very successful at putting people back to work.

GLINTON: That's essentially where it stood for weeks. One side argued, pay for the tax cuts and unemployment insurance within budgets. The other side argued that they should be paid for later. Maya MacGuineas is president of the Committee for a Responsible Federal Budget, a bipartisan group. She notes that both sides are right - sort of.

MAYA MACGUINEAS: Well, generally, unemployment insurance is found to be one of the things with the highest multiplier effects, or bang for buck, when it's put into the economy.

GLINTON: MacGuineas says that's because people on unemployment insurance are likely to spend their entire check, but the payroll tax cut is different.

MACGUINEAS: The payroll tax cut is not so well-targeted. It goes to people who need it and will spend it right away. It also goes to many people who don't - which means they'll pocket it; they'll put it in the bank. It's nice to have that extra money to save, but it doesn't do a whole lot to boost the recovery, in the short term.

GLINTON: Then there was talk of something uncommon on the Hill these days: compromise. Speaker John Boehner first floated the trial balloon about a payroll tax cut that wouldn't have to be paid for. That produced something you won't hear very often from Democrats on Capitol Hill.

SEN. DICK DURBIN: I think Speaker Boehner is right.

GLINTON: That's Senate Democrat Dick Durbin of Illinois.

DURBIN: At this point, let us extend the payroll tax cut. But the last point I will make: The extension of unemployment benefits is of equal value to the economy - and immeasurable value to those out of work who are struggling to find a job.

GLINTON: Almost as Senator Durbin was saying that, a compromise was beginning to take shape, with both parties taking part. The tentative deal would have the payroll tax reduction, worth about $100 billion a year, added to the deficit. But the deal would find enough spending cuts to offset the costs of changes to the unemployment insurance and the doc fix, in the short run.

In a contentious, closed-door meeting, House Republicans tried to sell the plan to those who remained unconvinced. Allen West, a congressman from Florida, was one.

REP. ALLEN WEST: We've got to be honest with the American people, and we've got to be held accountable for some of the things that we're doing that can have long-term ramifications. So, you know, I've got to think about this. I've got to pray about it tonight. But right now, this doesn't look like a good deal for the American people.

GLINTON: But Maya MacGuineas says this is only one compromise among many that Congress will have to make, and soon.

Sonari Glinton, NPR News, the Capitol. Transcript provided by NPR, Copyright NPR.