By Mike Lillis - 01/18/12 07:35 PM EST
House Minority Leader Nancy Pelosi on Wednesday stepped up Democrats' opposition to funding a payroll tax holiday with cuts to federal programs.
The California Democrat said the payroll tax cut should either be offset with a surtax on corporations and wealthy Americans, or it shouldn't be offset at all.
"They [Republicans] have a double standard: they have resisted paying for tax cuts for the wealthiest people in our country, but they insist that tax cuts for the middle class be paid for," Pelosi told a crowd gathered in Washington, D.C., for a meeting of the U.S. Conference of Mayors.
By drawing that line in the sand, Pelosi is setting up a showdown with GOP leaders, who are demanding that the payroll tax cut package be offset with spending cuts elsewhere in the budget.
With the current tax package set to expire at the end of February, lawmakers in both parties have been scrambling behind the scenes to identify offset provisions to extend the benefits through the end of the year. Aside from the payroll tax holiday for workers, the package includes an extension of emergency unemployment benefits and funding to hike payments for doctors who treat Medicare patients.
Behind Pelosi, Democrats have pushed back against the GOP's plan to offset the unemployment insurance (UI) provision, arguing that paying for the emergency benefits with cuts to other programs will neutralize the funding's stimulative effect.
"We have to make that fight, or else that surcharge [on the wealthy] is going to have to pay for that [UI] as well," Pelosi said. "We're not going to give to the middle class with one hand and take from them with another by saying, 'You're going to get the tax cut, but seniors are going to have to pay more for Medicare, or whatever."
Acknowledging that Republicans will reject the proposal to hike taxes on the wealthy, Pelosi offered several alternatives for offsetting the tax package, including a provision to end oil company subsidies and another to allow Medicare to negotiate prescription drug prices on behalf of millions of seniors in the program — proposals that most Republicans oppose outright.
"There are things that we can talk about, but the surcharge is the easiest [and] the cleanest," she said.
Pelosi also repeated her earlier proposal to hike doctors' Medicare payments using overseas war savings — a controversial budget maneuver because the expected drawdown of troops means the money would likely never be spent.
"We want to solve this problem once and for all," Pelosi said of Medicare's so-called "doc-fix." "We can do that by using the war savings to pay for it entirely and end the discussion."