GOP Ready to Combat Payroll Tax Narrative
With the House returning this week for a short session and with one week to go before the president’s State of the Union address, Republicans are on the clock to unite around a message on a package to extend a payroll tax holiday, unemployment benefits and Medicare payments.
President Barack Obama, facing a tough re-election, has been campaigning actively against Congress. And last December’s failure to pass a full-year extension, followed by a botched attempt by House Republicans to block a two-month bill, has given Obama ample material to weave a speech that could give him the political advantage on Congress’ own turf.
Though the bicameral, bipartisan staff on the conference committee formed to reconcile a full-year House-approved bill and the Senate-passed short-term bill has been working throughout recess, the real challenge begins now.
Democrats have spent the past three weeks gloating over their victory on the short-term extension, encroaching on Republicans’ usual advantage on tax cuts.
So the House GOP needs this week, capped by its annual retreat in Baltimore, to construct a defense against the tongue-lashing it is sure to receive from Obama. Having an understanding of what it will take to pass a bill out of its Conference will be a good start.
“As long as we can say something, that there have been meetings, that there’s been something, I think we can push back on the president’s potential narrative,” one Republican aide said. “I don’t think we want the president to come here and lecture us.”
But large questions still loom over the nascent talks: Will the GOP need to include more sweeteners to win over skeptical Members who view extending the payroll holiday as raiding the Social Security trust fund or who opposed the unemployment insurance provisions? Will changes to Medicare, which Senate Democrats have said is a non-starter, or a loosening of Environmental Protection Agency regulations be massaged into a deal?
And will Democrats, who scored one of their most significant political victories of 2011 on this bill, try to draw out the process to score a few more in 2012?
“The number one goal, and I hope the Republicans have learned a lesson, [is] extending the payroll tax,” Senate Majority Leader Harry Reid said in an interview on NBC’s “Meet the Press” on Sunday. “That was a disaster for them. Can you imagine Republicans … were opposed to lowering taxes?
“So I would hope that they understand that everything doesn’t have to be a fight,” the Nevada Democrat added.
With every maneuver in Congress subject to the considerations of a presidential election cycle, it might be best for all parties if the conference process on this is quick and easy. But that is an order easier said than completed. Sources close to the negotiations on a full-year deal between Reid and Senate Minority Leader Mitch McConnell (R-Ky.) that collapsed before Christmas say the major sticking points were on how to offset the cost of the extension package.
That remains a serious issue. One of the most repeated lines of the past two months is that every new set of negotiators has an expansive menu of potential offsets from which to choose, discovered by other failed panels such as the Joint Committee on Deficit Reduction or the talks convened by Vice President Joseph Biden. But sources in both parties and chambers question how vast that pot really is.
The summer’s Budget Control Act has already cut almost $1 trillion in discretionary spending, with another $1 trillion on the way as the result of across-the-board cuts triggered by the failure of the super committee. Lawmakers will have to consider that they will need offsets to take on that sequester — especially the more than $500 billion in defense cuts disliked by Defense Secretary Leon Panetta and a large swath of Congressional Republicans.
And if the new standard of paying for tax cuts is continued, Congress also will need to consider how it might pay for a continuation of the Bush-era tax cuts, extended until the end of this year, that lawmakers might renegotiate in the fall.
Meanwhile, Democrats have been advocating that revenues be included in a budget conversation that, up until now, has been dominated by spending cuts.
The fight over offsets, however, masks the other serious problem of resolving policy differences. Unemployment insurance is one of the tougher points of contention. The House-approved package — which passed in mid-December mostly on party lines — amends current law to reduce eligibility from 99 weeks to 59 weeks, enables states to drug test as a condition of distribution of benefits and implements several other requirements for recipients, such as showing progress toward a GED.
Sources familiar with the Reid-McConnell talks indicated the two leaders were close to a compromise position on unemployment insurance that would have put the weeks of benefits number somewhere in the 70s, but it’s unclear how that number could fluctuate if Democrats have momentum or if House Republicans are struggling to build a consensus.
Other outstanding issues, such as flood insurance — which both chambers passed independently in different forms but was included in the House bill — or an easing of emissions regulations for manufacturers, could be debated.