House Republican leaders agree to extend payroll tax cut

Surrendering to political reality, House Republican leaders did an about-face and said they were willing to extend a payroll tax cut for 160 million working Americans without insisting that it be paid for with spending cuts.

The dramatic shift Monday was an effort by Republicans to get past an issue on which President Obama and his Democratic allies had roundly attacked them since December. Polls have indicated that the Republicans have suffered considerable damage from Obama’s assertion that they were blocking a tax break for the middle class.

Substantively, the result could mean that average working Americans will continue to receive an extra $20 a week in their paychecks uninterrupted through the end of the year. A vote on the GOP proposal could come as soon as this week, just days before the tax break is set to expire Feb. 29.

Politically, the Republican retreat means that Obama will have scored a big win on his top legislative priority for the year.

Republicans have argued since November that the cost of the tax cut must be offset by spending cuts. But that stance had little voter appeal and allowed Democrats to accuse Republicans of hypocrisy: The George W. Bush-era tax breaks for the wealthy, which Republicans will push to renew this year, have never been offset with spending cuts.

“This is not our first choice,” said House Speaker John A. Boehner (R-Ohio) in a statement with his leadership team, Majority Leader Eric Cantor (R-Va.) and Rep. Kevin McCarthy (R-Bakersfield), the third-ranking member of the GOP leadership. They described the proposal as a backup plan, required because Democrats have seen no reason to compromise in a battle they believed they were winning.

“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,” they said.

Yet the Republican leaders’ desire to turn the page does not mean the rank and file is ready to fall into line. Boehner faces the same potentially strong head winds from his tea-party-aligned majority as in the past, and at least some conservatives are likely to buck the compromise. That will force him to lean on House Minority Leader Nancy Pelosi (D-San Francisco) to win enough Democratic votes for passage.

As leaders considered the GOP offer, Democratic aides could not contain their enthusiasm for the breakthrough. Said one: “Send it on over.”

But some Democratic leaders, including Pelosi, were cool to the overture, largely because it failed to resolve two other issues that have been part of the $160-billion package along with the payroll tax cut — measures to continue long-term unemployment benefits and block a pay cut for doctors who treat Medicare patients. At the White House, Press Secretary Jay Carney said, “We need to do all three.”

In dealing with the GOP rank and file, at least, Republican leaders got some help Monday from Heritage Action for America, the political arm of the Heritage Foundation, which appeared to provide cover to conservative lawmakers as they return to Washington this week to be briefed on the issue.

“It is past time to move beyond this issue,” said Heritage Action Chief Executive Michael Needham. “The American people deserve a real debate between the two contrasting visions for the future of our country.… This is a debate conservatives will win if we boldly put our ideas forward.”

The chairman of the conservative Republican Study Committee, Rep. Jim Jordan of Ohio, told party leaders over the weekend that some lawmakers would agree with the new approach while others would not. He, though, will be on the side of the leadership, and he offered a preview of the arguments in favor of the strategy.

“Conservatives understand this fundamental principle, and that is: Allowing people to keep their money is a good thing, and you should never buy into the concept that allowing people to keep their dollars is something government would have to pay for,” Jordan said in an interview from Ohio.

Under the new GOP proposal, the payroll tax would be extended through the year while negotiators who have been trying to find a compromise approach to paying for the package would continue their bipartisan talks on offsets and on long-term unemployment benefits and the Medicare fee cut. Beginning March 1, long-term unemployment benefits are scheduled to lapse and the Medicare fee cut is to go into effect.

Republicans indicated that they would insist that those measures be paid for. That gives Boehner and Republicans some leverage and keeps Democrats at the negotiating table. Republicans want to reduce the length of time the unemployed can receive benefits.

During the contentious negotiations over the payroll tax, Republicans have wanted to pay for the package by trimming federal workers’ pay and making other domestic cuts; Democrats have balked and instead pushed for a surtax on those with incomes over $1 million. They have also suggested closing corporate tax loopholes.

Democrats have been reluctant to give ground, as polls show most Americans are comfortable asking the wealthy to pay higher taxes.

“What happened today is clear: House GOP leadership could no longer sustain their position on a payroll tax cut — demanding that it be paid for by cuts on the middle class, while refusing to ask millionaires to pay a dime,” said a senior aide who was not authorized to speak on the record.

The payroll tax cut trims by 2 percentage points the levy that workers pay into Social Security. That provides an average of about $1,000 a year for workers, a break that economists say is helping to stimulate the economy.

lisa.mascaro@latimes.com