GOP: Pay for payroll tax cut with federal workforce, safety net cuts

Senate Republicans have proposed wringing cost savings out of the federal work force and safety net programs to pay for an extension of the current payroll tax cut.

In a further sign that the debate had shifted to how to, instead of whether, to extend payroll tax relief, Senate Republicans would take a page from President Obama’s own fiscal commission and freeze salaries for federal civilian employees for three years. That would amount to a five-year pay freeze in total, given that a two-year policy is already in effect.

The plan would also accelerate the Simpson-Bowles framework for reducing the number of government employees by 10 percent, by only allowing the hiring of one new employee for every three who leave the federal workforce.

Simpson-Bowles would have mandated that the government only hire two employees for every three that departed.

Republicans also incorporated means testing for a host of federal programs in their proposal, including for food stamps, unemployment benefits and Medicare.

In all, the GOP plan includes roughly $230 billion in cost savings – enough, Republicans say, to pay for another year of the current 2 percentage point reduction in workers' payroll taxes and reduce the deficit by $111 billion.

The announcement comes a day after Senate Minority Leader Mitch McConnell (R-Ky.) said that Senate Republicans, unhappy with Democratic proposals to extend payroll tax relief, would come up with their own offsets.

Some Congressional Republicans have expressed skepticism about the extending the payroll tax cut at all, saying they were worried about the impact on the funding stream for Social Security and did not believe the tax break had been particularly stimulative.

But the top Republicans in both chambers – House Speaker John Boehner (R-Ohio) and McConnell – made clear Wednesday that GOP lawmakers would back a payroll tax cut extension.

In fact, House GOP leaders also pressed their rank-and-file on Wednesday to back continuing payroll tax relief, saying that was the right course of action for a party that prides itself on pushing for lower taxes.

“So Republicans will put aside their misgivings and support this extension, not because we believe as the president does that another short-term stimulus will turn this economy around,” McConnell said on the Senate floor on Wednesday. “But because we know it will give some relief to struggling workers out there who continue to need it nearly three years into this presidency.”

Senate Democrats rejected the GOP bill, citing the fact it does not expand the tax cut as their bill does.

Senate Majority Leader Harry Reid's (D-Nev.) spokesman did not specifically address the GOP's offsets but said that the current bill cannot pass the Senate.

“We are glad Republicans have seen the light and taken up Democrats' call to pass a middle-class tax cut, just a few days after their leadership indicated they would oppose it. However, Democrats’ proposal would put more money in the pockets of middle class families and create more jobs," Adam Jentleson said. "The Republican proposal cannot pass the Senate as it stands, but now that Republicans have reversed their position on this middle-class tax cut, we look forward to working with them to negotiate a consensus solution.”

House Budget Committee ranking member Chris Van Hollen (D-Md.), who represents many federal workers, dismissed the GOP approach as a ploy.

“The Republican payroll tax proposal represents another cynical ploy to single out federal employees for unfair treatment. The financial collapse and weak economy were not caused by the men and women who serve the federal government, and they should not be forced to shoulder the entire burden of the cost of recovery," he said. “Republicans cite the Simpson-Bowles plan as a guide for their proposals, which is deeply misleading. Simpson-Bowles presented a balanced plan to share responsibility, while the GOP has proposed the opposite."

The White House and Senate Democrats have proposed expanding and extending payroll tax relief in 2012, by cutting the rate to 3.1 percent for workers and for the first $5 million of employer wages.

The current payroll tax holiday, enacted in last year’s tax-cut compromise, cut the rate for workers from 6.2 percent to 4.2 percent and is set to expire at the end of December.

Democrats have also proposed paying for their expanded payroll tax relief, which will cost around $265 billion by their estimates in 2012, with a surtax on millionaires.

But Republicans have dismissed that pay-for as a political stunt, and said they could not get on board with the expanded payroll tax relief proposals.

Obama also pressed congressional Republicans to get on board with the Democratic proposal in Pennsylvania on Wednesday, without mentioning that Republicans had said they could back a payroll tax cut extension if it was paid for differently.

The GOP payroll tax proposal also includes the so-called Buffett Rule Act, which would let any taxpayer donate additional revenues on their tax return to the Treasury. That Republican proposal was in response to the president's Buffett Rule, which declared that millionaires should pay a higher percentage of their earnings than middle-class families.

It would also require anyone that makes more than a million dollars a year to pay full premiums for both Medicare Part B and Part D.

This story was updated at 5:35 p.m.