Congress Acts to Extend Payroll Tax Cut and Jobless Aid

By JOHN H. CUSHMAN JR. and ROBERT PEAR

Published: February 17, 2012 - New York Times

WASHINGTON — With members of both parties expressing distaste at some of the particulars, Congress on Friday voted to extend payroll tax cuts and unemployment benefits and sent the legislation to President Obama, ending a contentious political and policy fight.

The vote in the House was 293 to 132 with Democrats, who are in the minority, carrying the proposal over the top with the acquiescence of almost as many Republicans. The Senate followed within minutes and approved the measure on a vote of 60 to 36.

“One hundred sixty million Americans,” said Senator Max Baucus, the Montana Democrat who, as chairman of the Finance Committee, led negotiations over the measure with the House. “That’s the number of Americans who are helped by this bill.”

President Obama has said he will sign the bill as soon as Congress passed it, with lawmakers seeking to wrap up the legislation before leaving on the Washington’s Birthday break.

A compromise allowing the extension of the tax holiday for the rest of the year came together quickly this week, as Republicans decided it was not politically viable to resist in an election year. It avoided an abrupt increase in payroll taxes that would have taken effect March 1, returning them to the level of 2010. The taxes are withheld from the paychecks of most wage earners and finance the Social Security system.

The legislation also temporarily avoids cuts in payments to doctors under federal health insurance programs.

In the negotiations, which took place during a two-month temporary extension of a popular tax break that had been in place throughout 2011, Republicans gave up on their demands that the tax cuts be paid for. But they won provisions that would pay for the other spending increases in the bill by making cuts in other federal programs involving health care and government pensions.

According to the Congressional Budget Office, the package will increase the budget deficit by $119.5 billion over the next five years, but by a bit less over the longer haul as some of the spending reductions and new revenues are fully realized.

Republicans who said they supported the deal said they had won several important concessions during the talks, like imposing new conditions and limits on unemployment compensation and making a significant cut in the preventive-health spending called for in the health care overhaul that Democrats pushed through Congress in 2010.

Representative Renee Ellmers, Republican of North Carolina, called that cut “the most dramatic blow to Obamacare yet.”

But she said the overall deal was “a very important breakthrough and shows that we can come together and compromise.”

Democrats, some of whom sharply condemned the deal, saw things differently. Even those who voted for the bill, which the White House supported and Democrats considered a major act of economic stimulus to propel the recovery forward, said many of its provisions were misguided.

Two Democratic leaders, Representatives Steny H. Hoyer and Chris Van Hollen, both of whose Maryland districts contain thousands of federal employees, denounced cuts in future pension benefits for government employees, which were used to pay for the extension of unemployment benefits. They would have preferred tax increases on the wealthy, or on corporations, or closing loopholes like the one that lets fund managers treat their income as lightly-taxed “carried interest.”

“Nobody else in this bill, not a millionaire, not a billionaire, not a carried-interest beneficiary, not an oil company, nobody in this bill other than federal employees is asked to pay,” fumed Mr. Hoyer, the Democratic whip, confident that his denunciation of the bill would not endanger its passage.

“It’s time to stop scapegoating federal employees,” Mr. Van Hollen said.

Under the bill, the government would save $15 billion over 10 years by reducing its contribution to federal employee pensions and requiring new workers to contribute more.

But ultimately, the Democrats pronounced themselves satisfied.

“On balance, I come down in favor of supporting what the president asked us to do,” said Representative Nancy Pelosi, the minority leader.

In the Senate, there is considerable support for the bill in both parties, but just enough opposition to stop its passage from being a sure thing until the last moment.

The Congressional Budget Office said the provisions of the bill, taken together, would increase the federal budget deficit by $101 billion this year and by a total of $89 billion from 2012 to 2022. One provision, continuing the payroll tax cut for the next 10 months, will cost $93 billion, the budget office said.

Representative Dave Camp, Republican of Michigan and chairman of the House Ways and Means Committee, said the bill “prevents a tax increase for working Americans and makes the most significant reforms to federal unemployment programs since they were created in the 1930s.”

In addition, Mr. Camp said, the bill “ensures that seniors continue to have access to their doctors.”

Representative Sander M. Levin of Michigan, the senior Democrat on the committee, said the bill “will provide a boost to the economy” and create jobs.

“Unemployment insurance — people spend it,” Mr. Levin said. “That’s good for their subsistence. It’s good for the economy.”