House Republicans Prepping ‘Backup Plan’ on Payroll-Tax Credit

(Image Credit: Mario Tama/Getty Images)

House Speaker John Boehner, joined by his two top deputies – Majority Leader Eric Cantor and Whip Kevin McCarthy - announced today that Republicans are preparing a contingency plan in case negotiators attempting to break a stalemate on the payroll-tax credit extension fail to reach a deal.

The heart of the House GOP’s backup plan would extend the payroll-tax credit through the end of the year while negotiators work out a compromise on the “Doc Fix” and unemployment insurance, in addition to offsets to pay for it all.

“Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue regarding offsets, unemployment insurance, and the ‘doc fix,’” the GOP trio wrote in a joint statement. “Democrats’ refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don’t go up on middle class workers.”

After four public meetings, the 20-member conference committee tasked with reaching a compromise has failed to come to terms on a year-long extension of the payroll-tax credit, unemployment insurance and the ‘Doc Fix’ for Medicare physicians. A fifth public meeting has yet to be scheduled.

“This is not our first choice,” the leaders stated. “Our goal is to reach a responsible agreement in conference, but in the face of the Democrats’ stonewalling and obstructionism, we are prepared to act to protect small businesses and our economy from the consequences of Washington Democrats’ political games.”

Senate Majority Leader Harry Reid has also suggested that Senate Democrats will move on their own backup plan if a deal is not reached early this week.

In a statement reacting to news of the GOP’s backup plan, House Minority Leader Nancy Pelosi maintained that “Democrats have always demanded that we extend the payroll tax cut for 160 million Americans without paying for it” but she warned that the GOP’s plan could undermine the other policies that need to be extended.

“The Republican plan to decouple the payroll tax jeopardizes both the ability of seniors to see their Medicare doctors and benefits for millions of Americans who lost their jobs,” Pelosi, D-Calif., said. “There is no reason all three of these priorities cannot proceed at the same time as both the House and Senate agreed.”

One payfor that Democrats say they would agree to is a surtax on millionaires, also known as the Buffet Rule. A recent poll by ABC News-Washington Post showed that 72 percent of Americans supported increasing taxes on individuals earning more than $1 million annually.

“We didn’t pay for tax cuts for the wealthy, again, why should we pay for them for the middle class?” Pelosi said last week. “If they have to be paid for, 72 percent of the American people have the wisdom to know something has intervened between the wisdom of the American people and the decision of the Republicans in Congress.”

Republicans contend that the tax increase would stifle the economic recovery by targeting the same people they expect to create jobs.

Congressional leaders had hoped the conferees would reach a deal by Friday. That would afford the House and Senate adequate time to pass the legislation and send it to the president before the current stop-gap extension runs out Feb. 29.

The Republican leaders say if a deal is not reached, the House could schedule consideration of this measure “later this week,” once they are able to take the pulse of their rank-and-file members.

Lawmakers on both sides of the aisle have resisted the suggestion that Congress enact another short-term extension if the conference committee fails. The House passed its own year-long extension to the economic initiatives Dec. 13, but the Senate refused to consider the House-passed bill, instead opting for a two-month extension to which the House eventually agreed.