Both sides claim politics as payroll tax cut extension stalls again

A 20-member House-Senate conference committee is working to extend the payroll tax cut for 10 months before the short-term extension runs out February 29.

Story highlights

  • 2% payroll tax cut expires at the end of February
  • Parties are at odds over how to pay for an extension of the cut
  • Each side accuses other of deliberate delay for political gain

Deja vu, round two, a bad sequel or simply "here we go again" are some ways to describe the latest fight over extending the payroll tax cut. But even facing an end-of-month deadline before the 2% tax holiday expires, lawmakers appear no closer to a deal.

With talks stalled, congressional leaders of both parties Tuesday suggested the delay is intentional, arguing the other side actually sees an election-year political advantage in no deal being reached.

Senate Republican Leader Mitch McConnell, R-Kentucky, speaking to reporters on Capitol Hill, accused Democrats of dragging their feet to help President Obama's re-election efforts.

"It seems to me that Democrats in the Senate have sort of decided to link up with the Obama campaign and make sure that on any bipartisan discussions that occur, it actually doesn't lead to a bipartisan agreement," McConnell said. "I think the reason for that becomes increasingly obvious: They want to blame Republicans in Congress if nothing is accomplished."

Senate Majority Leader Harry Reid, D-Nevada, later suggested Republicans were trying to scuttle a deal that could help the economy in order to improve their chances of winning back the Senate majority and the White House.

"What are they going to talk about if the economy continues to improve?" asked Reid.

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Sen. McConnell on the payroll tax cut

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A 20-member House-Senate conference committee is working to extend the payroll tax cut for 10 months before the short-term extension runs out February 29. The tax break is estimated to affect about 160 million Americans. In addition to the payroll tax measure, negotiators are also trying to extend jobless benefits for the long-term unemployed and prevent a scheduled cut to the reimbursement rate for doctors who treat Medicare patients, known as the "Doc Fix."

"I'm trying to put the best face on it," said Sen. Jon Kyl, R-Arizona, a Senate GOP leader and one of the congressional negotiators trying to come up with a longer-term deal. "The reality is, as of today we haven't made much progress."

A similar sober assessment was offered by the No. 2 House Democrat, Rep. Steny Hoyer, D-Maryland. "Time is wasting. I'm very concerned about it. Whether or not they can get an agreement is in doubt at this time."

Despite the consensus, little progress has been made. Leaders on both sides are largely sticking to the same arguments that forced the bruising showdown on this same issue just two months ago.

Republicans insist the deal must be fully paid for by cutting spending elsewhere in the federal budget. Altogether the package would cost an estimated $160 billion. The latest fight centers, once again, on where lawmakers will find those cuts. Democrats want to cover the cost of the package by imposing a surtax on income over $1 million and eliminating some corporate tax subsidies, like those going to oil and gas companies. Republicans have proposed paying for a deal, in part, by extending the current pay freeze on federal workers and requiring wealthier seniors to pay higher Medicare premiums.

Reid announced this week he is working on a "fallback plan" to extend the payroll tax cut and other measures if the conference committee fails. Reid warned the committee needs an agreement or must at least show real progress by early next week.

Bottom line: With only three weeks left and a scheduled weeklong break ahead, Congress is running out of time. Sound familiar?