Sides plot endgame on payroll tax

The fight over extending the payroll tax holiday lurched toward an endgame Wednesday as President Obama and congressional leaders prepared for a summit to negotiate a compromise.

Senate Democratic leaders met with Obama Wednesday afternoon to plot strategy as House GOP leaders pressed Senate Majority Leader Harry Reid (D-Nev.) to act on House-passed legislation to extend the payroll tax cut and unemployment benefits. 

But with much to do there is still much uncertainty. 

Both sides agree that the payroll tax holiday should be extended — they just can’t agree on the details. And the omnibus spending bill has become a negotiating ploy as Friday’s deadline for keeping the government running rapidly approaches.

With just over a week until Christmas, Republicans and Democrats said Reid and House Speaker John Boehner (R-Ohio) should hammer out a payroll tax resolution in private. 

“Speaker Boehner has gotten the House Republicans to pass a bill. If Sen. Reid can’t pass a bill here then I suggest he calls Speaker Boehner and the two of them sit down and talk and maybe they can have some good cheer so we can all go home for Christmas,” said Sen. Jon Kyl (Ariz.), the Senate GOP whip. 

Sen. Richard Burr (R-N.C.) said Boehner should invite Reid to his conference room, but there was no invitation as of Wednesday afternoon. 

“The House has passed a bill, it’s time for the Senate to act,” said Michael Steel, Boehner’s spokesman.

Reid met with Boehner and Senate Republican Leader Mitch McConnell (Ky.) late Wednesday but aides reported minimal progress as a result.

House Republicans kept up a steady drumbeat of pressure all day Wednesday, indicating they feel confident in their bargaining position. And Boehner had tough words for the Senate at a breakfast earlier in the day.

“Guess what? It’s time for the United States Senate to act, and they’re going to act, because we can sit here and stare at each other in the face for as long as it takes, but they’re going to act,” he said. 

GOP leaders were said to be considering getting around the Senate by taking the unsigned conference report and bringing it to the House floor as a separate bill.

Asked if the House would seek to pass the omnibus on its own with Republican votes, Boehner said no decisions had been made.

Each side has issues with the other’s proposal for the payroll tax extension. Democrats don’t like a provision in the GOP bill that would require an expedited decision on the Keystone XL oil sands pipeline. 

And Republicans don’t like the Democratic proposal to pay for the extension by raising taxes on millionaires.

Reid indicated Tuesday that he’d be willing to drop that provision as part of a compromise to get the extension passed.

A Democratic source familiar with Wednesday’s White House meeting said the president and leaders agreed to look for ways to offset the cost of the tax holiday without raising taxes on millionaires. The source said Reid has ruled out further cuts to discretionary spending levels — which Republicans had proposed — leaving mandatory spending reductions a possibility.

But Republicans did not show any inclination to make concessions of their own in return for dropping the tax on millionaires. 

Several Republican senators said the Keystone proposal and language to weaken Environmental Protection Agency regulations for industrial boilers were major reasons for supporting the House-passed package. 

Republicans said the Keystone project would create more than 20,000 jobs, giving them a strong incentive to vote for the package — even though many are skeptical that extending the payroll tax cut would have much benefit for the economy. 

Reid tried to schedule a Senate vote on the House GOP bill Wednesday morning when it was clear it did not have the votes to pass.

Rather than risk an embarrassing number of GOP defections, McConnell blocked that attempt, as Kyl scrambled to figure out how many Republican votes the measure could draw. 

“I think playing around with a payroll tax and Social Security is enormously bad policy,” said Sen. Mike Johanns (R-Neb.). “I see it as a sleight of hand.” Earlier this month, Johanns and 25 other Senate Republicans voted against advancing a proposal supported by McConnell to extend the payroll tax cut and pay for it by freezing federal pay. 

McConnell said a nearly $1 trillion omnibus bill to fund the government should take priority over the payroll tax cut, arguing there’s a risk of a government shutdown when funding expires Friday. 

Democrats, however, worry that if the annual spending bills are completed, Republicans will leave town for the holidays before completing the payroll tax bill. 

The GOP countered that Democrats are playing politics with the budget. 

“It’s pretty clear to all of us that President Obama and Sen. Reid want to threaten a government shutdown so that they can get leverage on a jobs bill,” Boehner said Wednesday evening.

He reiterated that a deal had been struck on the omnibus spending package but that Obama and Reid were holding it up.

“We believe that the responsible thing to do is to move it,” Boehner said. “I’m tired of hearing what the Senate can’t do. I think it’s time to wait and see what the Senate can do. So I’m hopeful that the president and Sen. Reid will allow the appropriators to sign the conference report and allow that bill to come to a vote in the House and Senate.” 

Several Senate Republicans, including Sens. Bob Corker (Tenn.), John Cornyn (Texas) and Orrin Hatch (Utah), who voted against the earlier Senate Republican payroll tax bill, said they would likely support the House bill. 

Hatch called Keystone a potential homerun jobs project for Obama, and questioned whether the payroll tax proposal, the centerpiece of the president’s jobs agenda, would have a significant impact on the economy. 

“If it’s going to work, it’s got to work with an employer deduction, not employees, because employees aren’t going to create jobs, it’s the employers who are,” said Hatch, the senior Republican on the Senate Finance Committee. “I prefer tax rate reductions, I think that’s where the real benefits come from.” 

Senate Republican leaders believe there are 14 Senate Democrats who would support expediting the Keystone pipeline, including Sens. Max Baucus (Mont.), Jon Tester (Mont.), Ben Nelson (Neb.), Mary Landrieu (La.), Mark Begich (Alaska) and Joe Manchin (W.Va.). 

But keeping Keystone in the payroll tax holiday package would not necessarily translate into Democratic votes. 

Manchin told The Hill Tuesday that he would not support the bill “unless they find a finite way to stop taking from Social Security. Period.” 

While leaving the Capitol to meet with Obama, Reid assured reporters: “There’s always a path forward.”

However, some members of Reid’s caucus have grown tired of the otherwise combative tone of the payroll tax debate. 

“I think if I were going to critique Harry Reid this morning, I really wish we would stop with this ‘dead on arrival, not going to go there’ and begin to have language like, ‘we’re going to take a look at it and see if there’s anything that we can agree on here and over the next couple of days try to come to an agreement,’ ” said Sen. Claire McCaskill (D-Mo.) on MSNBC’s “Daily Rundown” Wednesday.

— Russell Berman, Erik Wasson and Geneva Sands-Sadowitz contributed to this report.

This story was updated at 10:30 p.m.