Lawmakers Move To Cusp Of Deal On Payroll Tax Cut

Congressional leaders are gauging lawmakers' reactions to a tentative deal extending a 2 percentage-point payroll tax cut and extra jobless benefits through 2012, a pact bargainers reached after House Republicans conceded that the tax cut would not have to be paid for with spending cuts.

Both sides cautioned late Tuesday that the agreement was not final and still could be altered. If completed, final congressional approval was possible by Friday, which would be an election-year victory for President Barack Obama, who made the payroll tax cut a keystone of his largely ignored jobs creation plan in September.

House Republicans emerging from a closed-door meeting said reaction to the package was generally positive, with some saying it reflected a desire to avoid spending months debating an issue that cost them dearly last year. In December, the House GOP initially opposed a two-month extension of the tax cut and other benefits that were about to lapse, only to retreat under pressure from outside party leaders and conservatives.

"We've got to move onto another issue," said Rep. Dennis Ross, R-Fla. "I think that's what the mood is."

"I'd say most people are for it, at least accepting it," said Rep. Peter King, R-N.Y.

Republicans were determined that Obama not be able to claim that the GOP was standing in the way of a middle-class tax cut. They would rather spend the months leading up to the November presidential and congressional elections focused on GOP themes of opposing tax increases, higher spending and Obama administration regulations that they say stifle job creation.

The tentative compromise would extend through December the current 2 percentage-point cut in the usual 6.2 percent Social Security payroll tax deducted from workers' paychecks. That reduction, which saves $1,000 a year for families earning $50,000, would affect 160 million workers and would otherwise expire on March 1.

It would also prevent extra unemployment benefits for the long-term jobless from expiring March 1 and block a 27 percent cut in reimbursements for doctors who treat Medicare patients. Overall, the legislation would cost roughly $150 billion.

On Monday, House Republicans dropped their demand that the payroll tax cut - totaling roughly two-thirds of the bill - be paid for. The hunt for savings had been one of the chief hurdles in weeks of negotiation over the legislation.

Also excluded, aides said, was a collection of expiring tax breaks, largely for businesses buying equipment and other corporate expenses that had been sought by some lawmakers of both parties.

Participants said the Medicare payments to doctors would be paid for by reducing Medicare reimbursements to hospitals and by cutting in half an $8 billion program under Obama's health care overhaul aimed at battling obesity and smoking.

The unemployment benefits would be financed with a collection of savings that include government sales of parts of the broadcast airwaves to wireless companies and from boosting federal workers' contributions to their pensions.

Democrats were saying little publicly, and House Democrats planned to meet Wednesday to discuss the tentative plan.

In private, some Democrats called it a victory, pointing to the payroll tax cut and unemployment benefit extensions while heading off the GOP's earlier demand that the entire measure be financed with spending cuts and other savings. Others complained that the jobless benefit extensions were not generous enough.

Republicans claimed victory, too, noting their rejection of early Democratic efforts to pay for the payroll tax cut by boosting taxes on millionaires, and with jobless extensions that would be less than the 99 weeks under current law that Democrats wanted to renew.

Aides presented differing figures about how many extra weeks of coverage would be provided, but they roughly agreed that the current 99-week maximum would fall to around 73 weeks for most states. Republicans had wanted to cut the ceiling to 59 weeks.

Republicans abandoned provisions from a House-passed bill that would have required the jobless to pursue a high school equivalency degree to get benefits and let states require recipients to undergo drug testing.

They also dropped other House-passed language forcing low-income people to have Social Security numbers to get government checks by claiming the children's tax credit, a move that was aimed at illegal immigrants and caused a furor among many Hispanics.

Early Tuesday, Obama tried turning up the heat on Republicans to strike a deal.

"Just pass this middle-class tax cut. Pass the extension of unemployment insurance," he said at a White House appearance. "Do it before it's too late and I will sign it right away."

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Associated Press writer Andrew Taylor contributed to this report.