Lawmakers close in on payroll deal

Top congressional negotiators said Tuesday that they were “very close” to reaching a major deal on a payroll tax cut package that would hand President Obama an early election-year victory.

Rep. Dave Camp (R-Mich.), the chairman of the conference committee dealing with the payroll tax cut, said negotiators had a framework and structure in place but were not quite ready to announce a deal.

“We still have some outstanding items, but as I said, we’re really close to concluding those,” Camp told reporters as he left a meeting with fellow negotiators to brief the full GOP conference.

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Rep. Fred Upton (R-Mich.), the chairman of the House Energy and Commerce Committee and another GOP negotiator on the payroll tax, said the panel hopes to be able to sign a conference report as early as Wednesday. The House could then vote on the agreement by the end of the week.

At a full meeting of GOP lawmakers Tuesday night, the message from Speaker John Boehner (Ohio) and Camp, according to Boehner ally Rep. Steve LaTourette (R-Ohio), was, “We achieved like 60 or 70 percent of what it is we were looking for, and we should take that and go home.”

LaTourette said Boehner told Republicans, “This hasn’t been an exercise in public relations that we were winning, and we needed to get this issue behind us so we can frame other issues and do some things we want to do [during] the balance of the year.”

A finalized agreement would mark a quick turnaround for a payroll tax conference committee that just days ago appeared to face significant obstacles, and seemed likely to take negotiations up to their Feb. 29 deadline.

It would also prove to be an exception to other high-profile talks over the last year on Capitol Hill – where discussions that both succeeded (negotiations to raise the debt ceiling) and failed (the deficit-reducing supercommittee) went down to the wire.

While rank-and-file Republicans predicted the payroll tax agreement would pass with bipartisan support, a number of GOP lawmakers were unhappy. “What I heard in there I don’t like,” Rep. Phil Gingrey of Georgia, one Republican who spoke up in the meeting to criticize the agreement, said afterward.

The deal, according to sources, would extend the two-percentage-point payroll tax cut through the end of 2012 without offsetting its roughly $100 billion cost, a concession House Republican leaders offered Monday.

In the wake of that GOP move, Camp and Sen. Max Baucus (D-Mont.), the vice chairman of the conference committee, headed up negotiations with Senate Majority Leader Harry Reid (D-Nev.) and Boehner that got lawmakers to the cusp of a deal, sources added.

The agreement would also extend emergency unemployment insurance and the Medicare “doc fix,” which combined cost roughly $50 billion to $60 billion. Those costs would be offset elsewhere in the budget.

The White House sees the extension of the payroll tax cut and unemployment benefits as critical to Obama’s reelection because of the effect they could have on the economy.

Mark Zandi, the chief economist at Moody’s Analytics, has estimated that ending the two programs could reduce economic growth in the United States by 0.7 percent this year, while extending them would help the economy grow at a 2.6 percent clip.

“The White House believes if we can pass the payroll tax extension, they’ll win reelection,” a senior Democratic aide told The Hill last week.

The Medicare reimbursement rate in the payroll tax deal could be paid for with savings from other healthcare-related matters, according to sources, while spectrum sales and savings from federal workers’ pensions are being discussed as offsets for unemployment insurance.

A Democratic source added that any pay-for would not include cuts to Medicare beneficiaries.

The pact would also include compromises over how to reform the unemployment insurance program, which had proven to be one of the major sticking points in negotiations.

According to sources in both parties, the reforms would not include educational requirements – such as mandating that certain beneficiaries be seeking a GED – that were included in the House-passed payroll tax extension last year.

The measure would include job search requirements for those receiving benefits, and give states greater latitude to drug test unemployment insurance applicants – though not as much leeway as was included in December’s House bill.

But at the same time, Democrats and Republicans with knowledge of the deal at the very least gave different characterizations of the maximum number of weeks that an unemployed worker would be eligible for benefits.

A Democratic aide said that the maximum number of weeks would remain 99 at first, before being reduced to 73 by the end of the year. Republicans have said the reforms would eventually cap the number of weeks at 63 in most states.

The most recent Democratic offer on unemployment had trimmed the maximum number of weeks by six, to 93. That proposal was quickly dismissed by Republicans, who had proposed slicing the maximum to 59.

Sources said negotiators were also haggling over whether to include expired tax provisions, such as credits for research and development and alternative energy —  something Democrats want to include in the broader deal.

News of the deal emerged just a day after the GOP concession, which signaled Republicans wanted to avoid a repeat of the political hit they took in December, when they initially balked at approving a two-month extension of the payroll tax cut approved by the Senate.

On Tuesday, some top Republicans, like House Majority Leader Eric Cantor (Va.), said that compromise was the only way to get a deal with Democrats, and that they would have preferred to offset the payroll tax cut.

But other GOP lawmakers noted the shift also fit in with the Republicans’ tax-cutting mantra.

"We don't believe tax cuts have to be offset," House Majority Whip Kevin McCarthy (R-Calif.) said.

Obama, who repeatedly has called for extending the two programs, also used his bully pulpit to seize the advantage on Tuesday.

Speaking at the White House, the president said Congress should extend the tax cut along with what he called “vital insurance lifelines” for Americans who have lost their jobs.

Repeating his usual line, he urged Congress to “do it now, without drama and without delay, no ideological sideshows to gum up the works, no self-inflicted wounds."

He added, “Do it before it’s too late and I will sign it right away.”

While Senate GOP Leader Mitch McConnell (Ky.) declined to publicly endorse the House GOP proposal not to offset the tax cut, Democrats in the Senate gloated.

Sen. Charles Schumer (D-N.Y.) said the GOP was in “full-scale retreat” on the payroll tax issue.

“We’re very glad that they gave in on the payroll tax cut,” Schumer said. “But they should not be under the illusion that they can figure now, job done. And we’re going to make sure they know that, and the American people know that.”

House Minority Leader Nancy Pelosi (D-Calif.) said her caucus would fall in behind the GOP proposal on the payroll tax.

"We have long proposed bringing this tax cut to the floor without pay-fors," Pelosi said, "and House Democrats will support it so that taxes are not raised on 160 million working Americans."

But even some Democrats have expressed skepticism about adding the cost of the payroll tax cut to the deficit.

Sen. Ben Cardin of Maryland, one of the Democratic conferees on the payroll tax cut, told reporters on Tuesday that, while he preferred paying for the tax break, he found the tax cut important enough to pass it without an offset.

And Sen. Mark Warner (D-Va.), who has pushed for a broad deficit-reduction deal, said at a Budget Committee hearing that not offsetting the payroll tax holiday would be “totally irresponsible.”

Molly K. Hooper and Erik Wasson contributed to this report.

This story was originally posted at 4:20 p.m. and was last updated at 9:20 p.m.