Tentative payroll tax pact reached

WASHINGTON -- Congress neared a deal late Tuesday to extend the payroll tax break and unemployment benefits for the long-term unemployed as well as head off a scheduled Medicare payment drop to doctors who treat seniors through the end of the year as part of a $160 billion legislative package.

The anticipated agreement was forged in part by House Republican leaders — still reeling from a political fight in December over the package that left the party bruised — who on Monday backed down from their initial bargaining position that the temporary 2% payroll tax cut be fully offset by spending cuts.

"My initial reaction is the Republicans caved because they believe that the public believes that we ought to move forward on this. I think they're right on that," Minority Whip Steny Hoyer, D-Md., told reporters on Tuesday.

The GOP's concession made it easier for Congress to reach an agreement on the package, which negotiators had been struggling to pay for. The cost of unemployment insurance and the Medicare "doc fix" is considerably less expensive.

Negotiators were discussing paying for the unemployment benefits extension by changing the pension system for federal employees to require them to pay more into the system, as well as auctioning off government-owned wireless spectrum to the private sector.

There are no tax increases in the package. Republicans appeared to have won concessions from Democrats on reducing the maximum number of weeks for unemployment benefits, currently at 99 weeks, and two new policies to toughen education and drug-screening requirements for recipients.

House Minority Leader Nancy Pelosi, D-Calif., said Tuesday that she would support an extension of the payroll tax cut — a signal that broad, bipartisan support is likely. Democrats have long maintained that the payroll tax cut did not have to be offset, and they were using long-running GOP demands to do so to argue that Republicans were opposed to tax cuts for the middle class, but not for the wealthy.

"I'm sure there's some argument in (the GOP that) 'we look pretty bad being for the rich guys and not being for the working guys,' " Hoyer said.

The payroll tax break means about an extra $1,000 for the average American family.

The House GOP's turnaround put the party in a difficult place. As recently as last week, Senate Minority Leader Mitch McConnell, R-Ky., had maintained that the tax cut be fully paid for. On Tuesday, McConnell declined to take a position on the reversal, announced Monday by House Speaker John Boehner, R-Ohio, and Majority Leader Eric Cantor, R-Va. "I don't have a view on it right now," McConnell told reporters.

If the deal is finalized by House and Senate negotiators, it could be sent to President Obama to sign before Congress recesses next week for Presidents Day.