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Boehner defends payroll tax deal

By Ted Barrett. Kate Bolduan. Alan Silverleib and Deirdre Walsh, CNN
updated 5:52 PM EST, Wed February 15, 2012
STORY HIGHLIGHTS
  • NEW: Obama promises to sign the bill immediately after Congress acts
  • Deal extends the payroll tax cut, unemployment benefits, and doc fix through the end of the year
  • Deal cuts maximum length of unemployment benefits from 99 to 73 weeks
  • Republicans have backed off their insistence on new spending cuts to offset payroll tax cuts

Washington (CNN) -- House Speaker John Boehner, R-Ohio, defended Wednesday the decision to move forward with a roughly $100 billion payroll tax cut extension that is not paid for, arguing that it was the only way to prevent a tax hike.

"We were not going to allow Democrats to continue to play games and cause a tax increase for hardworking Americans," Boehner told reporters on Capitol Hill. "We made a decision to bring them to the table so that the games would stop and we would get this worked out."

Congressional negotiators reached a tentative agreement Tuesday to extend the payroll tax cut and unemployment benefits while avoiding a fee cut for Medicare doctors, according to multiple legislators and aides.

The payroll tax cut, a key part of President Barack Obama's economic recovery plan, has reduced how much 160 million American workers pay into Social Security on their first $110,100 in wages. Instead of paying in 6.2%, they've been paying 4.2% for the past year and two months. The break is worth about $83 a month for someone making $50,000.

"I'm glad to see that Congress seems to be on the way to making progress on extending the payroll tax cut so that taxes don't go up on all of you," Obama told a crowd in Wisconsin Wednesday afternoon. "It will make a real difference in the lives of millions of people and as soon as Congress sends (the bill) to my desk, I will sign it right away."

Boehner said he expects a vote on the measure this week.

For their part, senior Democrats on Capitol Hill expressed confidence that the deal would pass.

"We're very, very close and I'm confident," said Montana's Max Baucus, the Democratic chairman of the Senate Finance Committee.

Negotiators were able to move forward with the framework for the deal after Republican leaders dropped their insistence earlier this week that the tax cut extension be funded through spending cuts elsewhere in the budget.

Party leaders also could not agree to fund it through new taxes, which are anathema to the GOP.

While the package could receive the endorsement of a House-Senate conference committee as early as Wednesday, some conservative House Republicans have expressed concern about the agreement -- which adds to the deficit -- and said they are unsure if they will ultimately support it. Republican House freshmen, elected on a tidal wave of tea party support in 2010, have made deficit reduction their top priority and repeatedly insisted that any new initiatives be fully paid for.

But some GOP House members have said they expect the package to ultimately pass with support from a majority of Republicans as well as Democrats.

"It's the art of a deal. I mean, it's a compromise," said Rep. Steve Latourette, R-Ohio. "You have people that didn't get ... 100% of what they wanted."

The agreement covers all three measures -- the payroll tax cut, the unemployment benefits extension, and the so-called "doc fix" -- for the rest of 2012. The latter two measures -- costing a combined $50 billion -- will be paid for, aides said.

Possible funding sources to pay for the latter two measures include savings from broadband spectrum sales of about $13 billion, increased pension contributions by federal employees of about $16 billion, and cuts to Medicare hospital and specialist fees that would not affect patients, according to the congressional aides.

Under the terms of the deal, the maximum time an unemployed person can receive benefits will drop from 99 to 73 weeks, according to a GOP aide and a Democratic aide close to the discussions. The maximum length of time for people in states with an average unemployment rate will drop to 63 weeks.

In addition, states will be allowed to perform drug tests on individuals applying for unemployment benefits if those people lost their previous job because they either failed or refused an employer's drug test, according to sources. Individuals receiving unemployment assistance could also be tested if they are seeking a job that generally requires a drug test.

Also, welfare beneficiaries will be banned from accessing public assistance funds at ATMs in strip clubs, liquor stores, and casinos.

The payroll tax cut, unemployment benefits and enhanced doc fix payments are currently set to expire at the end of February -- a timeline put in place through a short-term agreement reached by Congress in December. That agreement also set up the conference committee that resumed negotiations last month on a longer-term deal.

Final negotiations have been hammered out by the two committee chairmen, Baucus and Republican Rep. Dave Camp of Michigan, in conjunction with Senate Majority Leader Harry Reid, D-Nevada, and Boehner.

Monday's decision by House GOP leaders to drop their insistence that the tax cut extension be paid for by offsetting spending cuts was a sharp turnaround for House Republicans. Top party members had previously insisted that a failure to fully pay for the tax break would be financially reckless.

But the debate over whether and how to extend the tax cut has been a political loser so far for the Republicans, who publicly questioned its value last year. Democrats have gleefully highlighted the GOP's reluctance, using the issue to portray Republicans as defenders of the rich who are indifferent to the plight of the middle class.

Political analysts believe the showdown over the payroll holiday has eroded GOP strength on the party's core issue of lower taxes. Fearing negative repercussions, Republican leaders have now backtracked on the issue twice: dropping their opposition to the two-month extension last December and dropping their insistence on paying for a longer extension on Monday.

"December was a debacle," Sen. John McCain, R-Arizona, said Wednesday. "We don't want to repeat that."

"I think the GOP has read the writing on the wall when it comes to the payroll tax cut," said Brown University political scientist Wendy Schiller. "Americans are benefiting from it, and to take it away at this juncture leaves them open to charges of raising taxes. ... It would severely hamper the GOP presidential nominee's effort to defeat Obama."

Boehner and other top House GOP leaders tried Monday to separate the payroll tax extension from provisions dealing with unemployment benefits and the doc fix, but quickly backed away from the proposal. Democrats objected loudly to the idea.

CNN's Tom Cohen and Lisa Desjardins contributed to this report

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